The South African government’s plans to curb rising public debt are too ambitious, a team of local and international economic advisors to President Cyril Ramaphosa says, recommending a “more gradual and credible” approach.
Debt-service costs in Africa’s most industrialised economy risk hampering efforts to fight the Covid-19 crisis and crowding out spending on priorities like healthcare, education and policies aimed at lifting millions out of poverty.
They are close to 12% of total government spending and the fourth-largest spending item, similar in size to what is spent on health services, according to the budget presented in June to combat the coronavirus.
The recommendation by Ramaphosa’s Economic Advisory Council, one of many contained in a report seen by Reuters, will fuel debate about the country’s fiscal strategy ahead of Finance Minister Tito Mboweni’s mid-term budget due later this month.
“The pace of debt reduction is unrealistic,” the council said, commenting on the National Treasury’s target, set in June, for government debt to peak at roughly 87% of GDP in the 2023/24 fiscal year.
“A more gradual but credible debt reduction target … around 100% of GDP is recommended.”