Cape Town: The National Treasury has warned of escalating debt, saying it was crowding out other social expenditure programmes.
Acting head of the budget office in the National Treasury, Edgar Sishi, told MPs on Friday that if the debt service costs approached 5% of gross domestic product, it would impact on other programmes of government.
He said that money could be used on other social programmes.
“South Africa’s debt service costs are approaching 5% of GDP, that 5% could be used on other things. We are transferring that money from taxpayers to bondholders here and abroad. This is not the way South Africa’s fiscal policy should be run,” said Sishi.
The debt has been rising exponentially in the past 10 years.
Finance Minister Tito Mboweni has warned that debt should be less than 30% of GDP.
On Friday, the Treasury said debt service costs were the fastest growing expenditure item in the budget.
In the presentation to the joint committees, National Treasury said South Africa’s debt was one of the largest in the world.
“In comparison with a wide range of other developing countries, South Africa’s average primary balance over the last 10 years falls in the middle of the distribution. But South Africa’s three-year increase in debt to GDP is among the largest,” stated Treasury’s document.
“Over the past five years, the fiscal environment has been characterised by interest payments absorbing a growing share of limited public resources, which increasingly crowds out spending on social and economic investment. Debt-service costs are now 4.8% of GDP, up from 3.3% in 2016/17,” said the Treasury.
Director-General in the National Treasury Dondo Mogajane said he agreed with Cosatu that debt was not sustainable.
He said they were trying to strike a balance in the budget. | Political Bureau