JOHANNESBURG, Oct 9 (Reuters) – South Africa is heading for a budget crisis by the 2024/25 fiscal year unless it addresses a widening gap between revenue and expenditure, Finance Minister Tito Mboweni said on Friday.
At an emergency budget in June in response to the coronavirus crisis, Mboweni likened the country’s rising debt levels to a hippopotamus “eating our children’s inheritance”.
“A fiscal crisis is on its way by 2024/25 if we do not take serious measures to close the mouth of the hippopotamus,” Mboweni said in comments posted on the National Treasury’s Twitter account on Friday.
Africa’s most advanced economy was in recession before COVID-19 ravaged its economy, with the government’s strict lockdown imposed late in March putting major strain on businesses and households.
The lockdown dragged growth to its worst contraction ever in the second quarter and cost the economy over 2 million jobs.
“Estimates are that revenue for the year is going to contract by about 302 billion rand ($18.4 billion) and yet the pressure on the expenditure side is growing,” Mboweni added.
“If we head towards a fiscal crisis, then we have a sovereign crisis, and then a banking crisis. We can no longer live beyond our means.”
Apart from spending more to contain the spread of the coronavirus and cushion its impact on the poor, the government is also facing growing needs from struggling state-owned companies such as South African Airways and defence company Denel.
In June the Treasury forecast that the main budget deficit would widen to 14.6% of gross domestic product in the current 2020/21 fiscal year – the highest since the end of apartheid in 1994.
($1 = 16.4099 rand)
(Reporting by Olivia Kumwenda-Mtambo; Editing by Alexander Winning and Alex Richardson)
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