Now that Finance Minister Malusi Gigaba has presented his medium-term budget policy statement, investors, credit ratings agencies and taxpayers are questioning the fiscal sustainability of the South African balance sheet. The most favoured methodologies for evaluating fiscal sustainability are based on steady-state debt output ratios implied by stationary, growth-adjusted government budget constraint, or econometric tests of the intertemporal government budget constraint. Simply, the goal of the analysis is to determine whether the government is living "within its means" and to facilitate the assessment of corrective policy measures. In the medium-term budget policy statement SA’s gross loan debt is expected to increase from R2.5-trillion, or 54.2% of GDP, in 2017-18 to R3.4-trillion, or 59.7% of GDP, in 2020-21. Given that growing public debt has traditionally been an indicator of financial weakness and vulnerability to crisis, there is concern for assessing whether these high debt...

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