SA’s deep debt-trap trouble
Even before you factor in the economic fallout of the Covid-19 pandemic, SA’s fiscal future looks dire
As the government cobbles together a fiscal stimulus package to offset the effects of the coronavirus, fiscal policy experts warn that SA is heading into a debt trap — if it isn’t there already.
In a new paper, Philippe Burger and Estian Calitz, economics professors at the universities of the Free State and Stellenbosch respectively, show that huge public spending cuts will be required to stabilise the debt-to-GDP ratio at less than 80% over the coming decade. If these cuts are not made, the debt ratio will reach 100% on current policies, and keep climbing.