Sat. Apr 20th, 2019

This is how much it costs the South African government to service debt

South Africa is in a huge amount of debt. This is what it costs and how the country compares globally on the debt scale.

The post This is how much it costs the South African government to service debt appeared first on The South African.

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How much do we pay to service our debt? We took data from STATS SA to analyse the trends and numbers over the past 13 years and determine where we currently stand.

A history of debt

Before the 2008 – 2009 global financial crises, we enjoyed a three year period where we spent less than we earned. Once the crises hit and Government Revenue fell, we were unable to get out of debt despite revenue returning.

Since 2007/8 we have been spending more than we earn. And that’s a problem.

South Africa’s debt in numbers

In 2016/17 South Africa’s deficit was R156 billion and our gross loan debt in that same year R2.2 trillion.

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Photo: StatsSA

If each of us living in South Africa was responsible for paying back the debt, that’s R40 000 for you and R40 000 for me and R40 000 for everyone else. Channel your inner Oprah right here.

Add interest at this level, and we are looking at quite an expense. In fact, the interest alone was more than what was spent on medical costs, tertiary education and housing in the same financial year (2016-17).

Out of R1.58 trillion, R146 billion went towards interest repayments. So “for every R100 of total spending, R9,20 was used to pay interest on debt”

This is expected to rise from 9% to 13%.

How South Africa compares globally

Out of 109 countries, we are ranked 30th in terms of much of our budget is allocated to interest payments.

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Photo: StatsSA

Lebanon, Sri Lanka, Jamaica and Brazil were top of the list with highest debt burdens.

And our interest payments are higher compared to our neighbours Namibia, Botswana and Lesotho.

Stats SA notes that “a budget deficit is not uncommon across the world and should not automatically be seen in a negative light. Countries generally borrow money to cover financial deficits so that they can provide services to their citizens.”

Getting out of debt

Although budget deficit is common and shouldn’t always be viewed as negative, the drive towards a better balance of funds would be welcomed.

During our National Budget speech our Minister of Finance, Tito Mboweni, highlighted “reasonable, affordable expenditure” as one of the six “fundamental prescripts” of which the 2019 Budget is built.

The others being:

  • Achieving a higher rate of economic growth.
  • Increasing tax collection.
  • Stabilising and reducing debt.
  • Reconfiguring state-owned enterprises.
  • Managing the public sector wage bill.

Good luck with all of that. We’re just glad we’re not the ones pulling the purse strings.

The post This is how much it costs the South African government to service debt appeared first on The South African.

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