SA’s fiscal reckoning has arrived
A Herculean effort will be required to put SA back on a fiscally sustainable path. The supplementary budget takes the first step, but the challenge cannot be overstated: SA is facing a fiscal reckoning at a time when the economy has never been weaker. The odds are not in our favour
It has taken the Covid-19 crisis to push SA to this point, but finally, after years of prevarication, the government has accepted that SA’s public finances are dangerously overstretched and unprecedented spending cuts, coupled with deeper economic reforms, are needed to avoid a sovereign debt crisis.
The cabinet has been scared into accepting this prognosis from finance minister Tito Mboweni by the Covid-induced collapse in SA’s fiscal ratios. Based on National Treasury’s estimate that real GDP growth will contract by 7.2% in 2020, the consolidated deficit will double to 15.7% of GDP, and gross debt will exceed 81% of GDP in the current fiscal year...
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