SA may give in to IMF by introducing debt ceiling

The IMF has agreed to provide South Africa with $4.3 billion.
Tito Mboweni. Image: Dwayne Senior/Bloomberg

South Africa may introduce a debt limit in its budget, bowing to a suggestion proposed by the International Monetary Fund almost two years ago.

The government is “open to introducing a debt ceiling in addition to the nominal spending ceiling currently in place,” Finance Minister Tito Mboweni and Reserve Bank Governor Lesetja Kganyago said in a letter to the lender, in which it asked for an emergency loan to fight the coronavirus pandemic. The IMF has agreed to provide South Africa with $4.3 billion.

An increase in virus-related spending, including a R500 billion ($30.2 billion) stimulus package, is set to add pressure to an already strained fiscus. Government debt is projected to peak at close to 90% of gross domestic product by 2023-24, if the government takes active steps to manage its finances. Failing that, the debt trajectory will keep rising, topping 140% by the end of the decade.

Mboweni has warned that the country could slump into a sovereign-debt crisis unless it reins in borrowing. Once the impact of the pandemic subsides, authorities will take action to “reverse the upward trajectory of the public debt-to GDP ratio,” Mboweni and Kganyago said in the letter of intent. Steps will be introduced in the fiscal year through March 2022 and beyond, they said.

The nation’s debt sustainability “critically hinges on sustained implementation of policies to address underlying fiscal and structural weaknesses,” IMF staff said in a report prepared for its executive board to consider when reviewing the loan request.

The Washington-based lender said in November 2018, after a staff visit to South Africa, the country should consider introducing a debt anchor in its budget. Public debt was reaching uncomfortable levels and a ceiling on that would signal the government’s commitment to reduce its obligations and help tighten fiscal policy, it said at the time.

© 2020 Bloomberg

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Most important is that the ANC is TOLD what to do by the IMF( US, Japan, Germany etc). Power must be taken away from them through the debt that they created. So like anyone else -borrow money -you do as the lender says.

The less economic power in the hands of this failed states government..the better. Twenty six years of failure evidences this

There is a saying in Afrikaans that says: “As jy nie wil hoor nie, moet jy voel” that parents will know all to well.
Loosly translated it means “If you do not want to hear, you have to feel.”

All debt projections are very likely overly optimistic.

So 140% becomes your rosy best case.

Tito doesn’t have a dog’s chance at zero based budgeting.

The ceiling will probably get stolen.

IMF – please provide debt ceiling
ANC – sure thing, debt ceiling means nothing if we can print money.

You know I am astounded when this government tries to save a DEFUNCT airline whilst killing hospitality, tourism, restaurants and pubs AS WELL AS the tobacco & alcohol industries. NOT TO MENTION ALL THE SMALL BUSINESS OWNERS THAT HAVE GONE BUST???????????On the job trainees ??

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