SA taps contingency reserves to limit rising debt
South Africa's government will draw down US$8 billion over the next three years from contingency reserves held at the central bank to limit rising debt, the National Treasury said yesterday.
Africa's most industrialised economy has barely grown in more than a decade, with rising debt-servicing costs eating up a growing share of the national budget.
The bleak economic backdrop is looming large over a general election due on 29 May that could see the governing African National Congress party lose its parliamentary majority for the first time since the end of apartheid 30 years ago.
Unusual move
Presenting the 2024 budget, finance minister Enoch Godongwana said the unusual move to draw down R150 billion from the Gold and Foreign Exchange Contingency Reserve Account (GFECRA) would not compromise the central bank's solvency and still leave sufficient buffers to absorb exchange rate shocks.
GFECRA captures gains and losses on the country's foreign currency reserve transactions and has a balance of more than R500 billion, larger than plausible reserve losses from rand appreciation, the Treasury said.
The government will receive R100 billion in the next fiscal year to the end of March 2025, and R25 billion in each of the following two years.
Revenue
Among revenue measures, the Treasury proposed R15 billion of tax increases next fiscal year to alleviate fiscal pressures.
Consolidated spending is seen rising to R2.6 trillion in fiscal year 2026/27 from R2.4 trillion in 2024/25, with increased allocations including health, education and the extension of a social grant introduced during the Covid era.
Gross debt is now projected to stabilise at 75.3% of gross domestic product in 2025/26, below the 77.7% ratio seen in November.
The consolidated budget deficit in the current fiscal year that ends in March is seen at 4.9% of GDP, unchanged from November's forecast, and the economy is seen growing 1.3% in 2024, up from estimated growth of 0.6% in 2023. - Reuters
Africa's most industrialised economy has barely grown in more than a decade, with rising debt-servicing costs eating up a growing share of the national budget.
The bleak economic backdrop is looming large over a general election due on 29 May that could see the governing African National Congress party lose its parliamentary majority for the first time since the end of apartheid 30 years ago.
Unusual move
Presenting the 2024 budget, finance minister Enoch Godongwana said the unusual move to draw down R150 billion from the Gold and Foreign Exchange Contingency Reserve Account (GFECRA) would not compromise the central bank's solvency and still leave sufficient buffers to absorb exchange rate shocks.
GFECRA captures gains and losses on the country's foreign currency reserve transactions and has a balance of more than R500 billion, larger than plausible reserve losses from rand appreciation, the Treasury said.
The government will receive R100 billion in the next fiscal year to the end of March 2025, and R25 billion in each of the following two years.
Revenue
Among revenue measures, the Treasury proposed R15 billion of tax increases next fiscal year to alleviate fiscal pressures.
Consolidated spending is seen rising to R2.6 trillion in fiscal year 2026/27 from R2.4 trillion in 2024/25, with increased allocations including health, education and the extension of a social grant introduced during the Covid era.
Gross debt is now projected to stabilise at 75.3% of gross domestic product in 2025/26, below the 77.7% ratio seen in November.
The consolidated budget deficit in the current fiscal year that ends in March is seen at 4.9% of GDP, unchanged from November's forecast, and the economy is seen growing 1.3% in 2024, up from estimated growth of 0.6% in 2023. - Reuters
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