LETTER: A debt-to-GDP ratio from hell
Presidential advisers’ plan may be bold but it’s not sensible
Claire Bisseker asserts that the SA recovery plan of the president’s economic advisory council is a sensible one (“Tito Mboweni now has to pick his way through the nine circles of hell” (https://www.businesslive.co.za/bd/opinion/columnists/2020-10-19-claire-bisseker-tito-mboweni-now-has-to-pick-his-way-through-the-nine-circles-of-hell/), October 19). That plan recommends a stabilised debt-to-GDP ratio of about 100% as well as a stabilised primary budget surplus of 4% of GDP.
Is this plan realistic? SA struggled to get to a 4% of GDP primary budget surplus during the brief halcyon period of the early 2000s. How then can it run such a budget surplus for an indefinite period? Can an emerging-market economy with a real interest rate of 5% and sub-3% GDP growth rate maintain a debt-to-GDP ratio of 100% indefinitely?..
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