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SA debt to gdp


With the Budget on Wednesday this week, the 21st of February, and markets expecting the marked fiscal slippage of the MTBPS (Medium-Term Budget Policy Statement) in November last year, if not worse, the rand has weakened.

2023’s MTBPS saw gross debt was projected to peak at 77.7% of GDP in 2025/26, substantially higher than February 2023’s Budget estimate, of 73.6% of GDP for the same year, with deteriorated bond values persisting (see Bond Note, 31st January).

Gross debt projections were raised in eth MTBPS, to above 70.0% / GDP by 2031/32, reducing the sustainability of government finances, with a debt ratio of 60% of GDP the maximum sustainable debt ratio for an EM economy, and so worrying markets.

Expenditure is already74.2% of budget for the first three quarters of 2023/24 (and revenue 71.5%), vs. expenditure of 70.1% for the same period of 2022/23 (revenue 72.2%) - a marked drop in the projected debt to GDP ratio for this year is unlikely.

Specifically, for this fiscal year (2023/24), the 2023 February Budget projected gross debt at 72.2% of GDP, which was then pushed up to an estimate of 74.7% of GDP in 2023’s November MTBPS, evidencing the deterioration in fiscal health. 

Additionally, the 2023/24 budget deficit was revised weaker, at -4.9% of GDP in the MTBPS vs. -4.0% of GDP, further evidence of fiscal slippage, and the deteriorated budget deficit projections of later years won’t have improved substantially.

Indeed, markets worry about an even worse outcome, given 2024 is an election year and the ANC is seeking to cling to power by making election promises already which will place even greater expenditure pressure on the budget finances. 

For 2024, the MTBPS’s growth forecast is aligned to ours, at 1.0% y/y, but for 2025 the MTBPS’s 1.6% y/y is likely to prove too strong, risking lifting the gross loan debt projection to GDP for 2025/26 higher once again, on even further fiscal slippage.  

Overall, the state continues to overspend this fiscal year compared to the comparative periods of last year, eroding the chance of the country’s gross loan debt coming in substantially below the projected figure, which is undermining bond yields.

About the author

Annabel Bishop

Annabel Bishop

Chief Economist of Investec Ltd

Annabel holds an MCom Cum Laude (Economics and econometrics) and has worked in the macroeconomic, risk, financial market and econometric fields, among others, for around 25 years. Working in the economic field at Investec, Annabel heads up a team, which focusses on the macroeconomic, financial market and global impact on the domestic environment. She authors a wide range of in-house and external articles published both abroad and in South Africa.


Rand knocked by US rate cut timing disappointment PDF 1.83 MB
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