Mboweni: We cannot allow SA to move towards a sovereign debt crisis

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Finance Minister Tito Mboweni has presented the Medium-Term Budget Policy Statement (MTBPS) against the backdrop of growing national debt and an economy decimated by the COVID-19 pandemic.

Finance Minister Tito Mboweni delivers his Medium-Term Budget Policy Speech in Parliament on 28 October 2020 in Cape Town. Picture: GCIS

CAPE TOWN – Finance Minister Tito Mboweni has presented the Medium-Term Budget Policy Statement (MTBPS) against the backdrop of growing national debt and an economy decimated by the COVID-19 pandemic.

Treasury budget documents show how simply servicing the interest on national debt is absorbing a growing share of limited public resources.

The MTBPS seeks to shift government’s priorities and cement policies that drive economic recovery and fiscal consolidation.

The MTBPS is titled Securing economic recovery beyond COVID-19 and it paints a bleak picture of country’s finances.

• READ: Tito Mboweni’s Medium-Term Budget Policy Statement

It predicts the economy will contract by 7.8% in 2020 and the nation will end the year at debt levels of more than 81% to GDP.

Treasury documents released with the MTBPS reveal how debt service costs are now 4.8% of GDP, up from 3.3% in 2016.

Finance Minister Tito Mboweni warned against the country moving towards a sovereign debt crisis.

“This crisis has been particularly severe but we cannot allow ourselves to fall into a season of despair despite the challenges of the pandemic. We cannot allow ourselves to move towards a sovereign debt crisis.”

On addressing this Mboweni has made a number of suggestions and fiscal measures to narrow the budget deficit and stabilise debt over the next five years.

“We table a five-year fiscal consolidation pathway that promotes economic growth while bringing debt under control. The fiscal measures re-align the composition of our spending from consumption towards investment.”

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