South Africa Risks Having Its Debt-To-GDP Rise To 95 Percent-IIF

By  |  October 3, 2019

A report by the Institute of International Finance has said South Africa’s public debt could rise as high as 95 percent if the government does not take the necessary steps to restructure ailing state utility Eskom and implement a workable growth plan.

“South Africa’s debt sustainability is increasingly in question,” the IIF noted in its report.

Debt-ridden power utility Eskom has continuously recorded losses that have had ripple effects in the SA economy, this is despite numerous government bailouts.

For the year to March 2019, the embattled utility suffered a loss of ZAR 20.7 Bn, its largest ever financial year loss.

The utility’s crippled financial and operational situation has continued to pose a huge threat to South Africa’s economic prospects since it is hurting the fiscus.

The IIF report comes after Central Bank cautioned that the government’s debt is rising at a worrying rate, from less than 30 percent of GDP before 2008 to nearly 60 percent.

The National Treasury earlier forecasted that the South African economy would expand by 1.5 percent this year, but later it cautioned that the growth might be lower given that the government granted Eskom ZAR 59 Bn two-year bailout.

“The key for the improvement of the situation is the implementation of the national growth plan and Eskom restructuring blueprint,” the IFF said adding, “Investors and rating agencies will follow the October and February budget announcements closely.”

The Southern African country’s government released an economic policy paper for public comment. The paper which was drafted by the National Treasury were structural reforms that were anticipated would propel the growth of the ailing economy when implemented.

Featured Image Courtesy: Integrate Immigration

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