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South Africa ‘no way near debt distress’ – Sarb governor

Despite the country’s debt-to-GDP ratio nearing the 100% mark seen as a red line for investors and credit rating agencies.
Reserve Bank Governor Lesetja Kganyago. Image: Reuters

South Africa is “no way near debt distress”, central bank governor Lesetja Kganyago said on Friday, despite the country’s debt-to-GDP ratio nearing the 100% mark seen as a red line for investors and credit rating agencies.

Kganyago, speaking live online during an African Development Bank panel discussion, however warned of the dangers of implementing fiscal austerity during a prolonged contraction of the economy.

“Debt is an outcome of your fiscal policy stance, so for as long as you are running a fiscal policy deficit you will have debt,” Kganyago said. “(But) it could actually be self-defeating if you try to implement fiscal consolidation during a growth crisis.”

Africa’s most developed economy, and the hardest hit by COVID-19 with more than 1.5 million confirmed cases, was in recession before the pandemic struck, accumulating a large stock of debt over the last decade to plug widening budget deficits.

In last month’s budget, the treasury forecast the deficit to more than double to 14% of gross domestic product (GDP) in the 2020/21 fiscal year.

Debt as a ratio of growth is seen reaching 87.3% by 2023, but only if the deep cuts to public sector wages and other spending programmes materialise, something credit agencies have expressed doubts over, with unemployment soaring and growth stalling.

The economy shrank 7% in 2020, the biggest contraction since 1920 according to the Reserve Bank.

Kganyago added that debt forgiveness in the South African context would not be necessary as most of the country’s debt, around 90%, was denominated in local currency.


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And here I thought any debt is bad debt and is reason to be concerned? Especially if the debt is not serviced promptly.

What a joke

If this isn’t disinformation, what is?

Not to mention disconnect! Perhaps Kganyago and Tito should meet for a coffee so Tito may show him what the wage bill, corruption and looting is doing to every fiscal

I think Kganyago should get new eye drops too, ine’s that open your eyes

The youtube presentation titled MMT is Fake Economics by Daniel Lacalle is far more worthy of consideration.
The latest offering of his site entitled The Bubble Of Everything: How A Debt-Driven Economy Creates More Frequent Crises is more than food for thought. Not suitable for ANC clowns posing as pundits.

“Interesting to see how the MMT community always use the same trick: insult.
No, governments do not “create reserves” eternally by deficit spending.
No, government spending does not lead economic growth.
No, governments do not have better or more information about the demands of the economy than the private sector.
No, money creation is not neutral. It always erodes purchasing power of savings and real wages.
No, you don’t use taxes to “eliminate excess money” governments use it to extract from the productive to finance the non-productive.
No, one unit of deficit is not one unit of savings. You forget multi-leveraged funds and central banks purchasing with money created from nowhere.
No, supply and demand of money do not rise in tandem, avoiding high inflation, even less so when supply of money is a monopoly of governments that do not suffer high inflation.
No, government is not “the people” and government spending is not “public investment”. It is political spending.
If money printing led the economy, Argentina and Venezuela would be the most prosperous nations in the world.
Why is Argentina or others now dollarized? It was not so before. Because their citizens are not stupid and know that money printing to finance government spending is destructive.
Why do the Fed, BOJ and ECB get away with it? Because they increase money supply through the market and credit mechanism, and create excessive inflation in financial assets as well as higher real inflation than official CPI shows.
Stop believing in the magic money tree.”

Let’s not test the limits please Sarb.

Citizens and Businesses behave in the same way that government officials act, the overburden themselves with unnecessary debt, work inefficiently and delay the inevitable with little to no progress whilst exporting their value.

Globally we are becoming more of a socialist society each day because of Expropriation Through Inflation, Growing Debt and Support of Nationalism of business and industries.

This ultimately leads to economic stagnation, poor use of resources and and population misery.

For a socialist country to grow it would need to wage war, this war against other countries, businesses and anyone who has something which they wish to acquire by any means possible other than developing it themselves.

Today we can cleary see this in countries such as the USA, South Africa and to an extreme Zimbabwe.
The US wages war and Expropriated through inflation to grow its stagnating economy whilst SA regresses by Expropriating Through Inflation and Stealing from business.

Going 100% debt to gdp means your insolvent, MMT is a cheap socialist means of acquiring power illegitimately and as whole society regresses.


I think we are at record levels of debt. Elections are nearing; so I don’t think there will be “deep cuts to public sector wages”.
As for spending programmes; the cadres are waiting to eat. Hopefully this cooldrink money is ploughed into business to grow the economy.

The debt levels when the NATs realized that they could not sustain this financial burden was around 30-35% (–of-nominal-gdp) ; and forced them to talk to ANC?

Nearly forty years ago my first boss said: When someone says “don’t worry”, then you WORRY. In my professional career to date I couldn’t prove him wrong.

How many citizens will actually understand the ugly implication of the lovely Governor’s accurate comment? The fact that 90% of the debt is denominated in rand is a saving grace because it implies that we can simply print the currency to service the debt.

What a lovely concept this is! If you live beyond your means, and your creditors accept your bounced cheques as payment, then you can borrow an unlimited amount and keep on paying with bounced cheques. This is the magic of a fiat currency regime.

The problem is that your own citizens use these bounced cheques to buy real products and services that are indirectly priced in hard currency. The price of wheat, bread, potatoes, maize, meat, milk, veggies and petrol are determined internationally and priced in terms of the dollar. The producers of these products will demand more bounced cheques as payment for these products. You may fool the lenders with the bounced cheques, but you won’t fool the local producers and retail companies. They will demand fair payment for their products, otherwise, they won’t be able to afford their input costs that are priced in dollars.

You can pay the debt with printed currency, but your citizens will pay the price through runaway inflation. Money printing and inflation is simply another tax on local citizens. So, it does not matter if you raise the VAT tax rate, or devalue the currency, the implication is the same. Your citizens will service the debt with the loss of their purchasing power.

Hmmm but every other country is doing exactly this especially the US, UK and Europe … every one replicating same time thing.
SA actually is still conservative despite 90% of its debt in Rands.

Just because everyone else is doing it, does not make it right. Many countries made slavery legal, did mean it was right…

That is why globally we seeing total debt amount to $280 trillion and it will grow even more upwards of $300 Trillion by the end of this year.

Everyone thinks the price of Bitcoin is going up but it is not… Rather it is fiat currencies which are losing value. The US Dollar lost almost 99% of its value in the last century.

The Rich are becoming richer whilst the poor become even more poor…

Money Printing = Expropriation Through Inflation

Thanks for putting the rand denominated debt issue in perspective. How many citizens fully understand the governor is no fool and has nothing to do with party politics!

Fair comment. Those countries you mention enjoy the exorbitant privilege of printing reserve currencies. They enjoy a constant demand for their currency. We don’t have this advantage. If we print the currency to service the debt, the rand will tank as international bondholders withdraw their investments.

Foreigners own more than 30% of our bonds. This implies that we can either raise the VAT rate by 100% to service the debt, or we can devalue the currency and the rand will crash by 30%. These options will have similar consequences for the purhasing power of locals.

We are in the same situation as Venezuela, Argentina and Argentina. We cannot hunt with the big dogs.

But is the sarb actually doing this QE ? Has anyone seen anything about this ? All that i have read are articles about how SOEs are having to retrench and govt employees are not getting increases.

Ie it looks like the idea is to go the cost cutting route rather than the money printing route.

The SARB has bought R1 billion in March, R11 billion in April, R10 billion worth of government bonds in May and R5 billion in June 2020. Some describe this as QE but the Governor said it was only emergency measures to provide liquidity to the bond market that experienced a stampede of sellers and an absence of buyers.

The SARB is mandated to do this. This is not QE as we know it in the US because the SARB did not intent to lend to government directly.

The 100% isn’t the problem

The cost is. Around a quarter of our taxes go to interest on debt – more if you count the debt in SOE that invariably get funded from tax.

So half revenue is salaries
A quarter interest

No fixed capital formation

Well said Johan and this is the key; the perceived ability to pay the debt you run up back. For countries like Japan (and the US) with massive debt ratios, there is still a perception that it can be serviced.

This “governor” cannot seem to acknowledge or understand this. I suggest he is going to lead SA down the same path his ANC chums led SAA and Eskom i.e. to a position where the country cannot services its debt; then it is big troubles.

Dear Sencie
Les then 1% of the population will understand your comment.

That will be sad because the economy in a fully democratic country is only a manifestation of the mindset of the average voter. This explains the difference between Switzerland and Zimbabwe.

If you can determine the level of understanding that the average voter has of basic economic principles, then you can predict the future of the economy.

Kganyago supposedly knows more than all the other investors, creditors and rating agencies.

It’s cool man, we’ll just find random pools of money in a cave and pay our magical debt fairies…

All in best order – nothing to see here..on the way from junk to super junk.. re- naming process on track – all good..VIVA ANC

Mmmmm … I guess the Governor…. is trying to magically pull a rabbit out of hat …

like many South America countries … their currencies have devalued over time…

….make sure you hedge against the RAND.
…. a matter of time before the RAND starts its devaluation(Again!)

….brain drain at the National Treasury and at the SARB says alot about future decision making …

Don’t worry they say.

Many years ago the company I worked for was in trouble due to some dodgy dealings. There were members of the directors board who said ‘don’t worry your jobs are safe’

Two weeks later we were all retrenched and that director jumped ship to another company a week later. Never trust anyone in the regime nor in business

Lier lier pants on fire

Guys, when ‘you know what’ hits the fan (it hasn’t yet) they will come for your business, for your house, for your car, for anything they can get their grubby hands on.
Our present time will seem like paradise. It baffles me how people believe anything these clowns are uttering.

Our (once) fantastic country was cut of diamonds but through thievery and deception it has now been turned into a pile of manure

End of comments.





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