Finance Minister Enoch Godongwana has warned that the government’s debt will exceed the R6 trillion mark by 2025/26.
He also highlighted that the rising annual budget deficits have reached an extent where the government will borrow an average of R553 billion per year over the medium term.
Godongwana revealed this today when he tabled the Medium-Term Budget Policy Statement (MTBPS) in parliament today.
“As a result, gross debt rises from R4.8 trillion in 2023/24 to R5.2 trillion in the next financial year and by 2025/26, it will exceed the R6 trillion mark.
“We now expect gross government debt to stabilise at 77% of GDP by 2025/26, and this is higher than the level we forecast in February.
“Over the next three years, debt-service costs as a share of revenue will increase from 20.7 per cent in 2023/24 to 22.1 per cent in 2026/27.
The cost, or interest of this debt, for next year alone, amounts to around R385.9 billion,” said Godongwana.
He added that over the Medium-Term Expenditure Framework, the interest costs will amount to R1.3 trillion.
The Minister also painted a grim picture about the rising debt services costs, which he said are delaying government’s socio-economic programmes, and hampered by slow economic growth.
With the bloated government departments and entities, Godongwana said that action is being taken to “review and reconfigure the structure, size of the state, closing or merging ineffective entities and programmes.”
Despite this desperate bleak scenario, the Minister allocated additional funding of R24 billion this year and R74 billion over the medium term which will be used to fund the 2023/24 wage increase and the associated carry-through costs.
There was however good news for the Covid-19 Social Relief of Distress grant allocated R34 billion for the grant programme for another year, and the Expanded Public Works Programme and the Community Works Programme was also extended by another year.
The Minister also announced that the government will also reconfigure conditional grants, that include urban settlement development grant, the integrated urban development grant, and the municipal infrastructure grant.
Godongwana expressed concern about the difficult financial conditions faced by municipalities, especially regarding the staggering R58.6 Eskom debt.
To help the cash-strapped municipalities, the Treasury has announced that municipalities owing Eskom as of end-March, must apply to participate in the debt write-off scheme, albeit with strict conditions.
“These conditions include enforcing strict credit controls, enhanced revenue collection, up-to-date payment of Eskom monthly current account.
“By October 2023, 67 applications had been submitted, totalling R56.8 billion or 97 per cent of total municipal debt owed to Eskom at end-March 2023.
“Twenty-eight applications have been approved, the remainder are being assessed and verified with provincial treasuries,” added the Minister.
The Minister also reassured the country that the government, as part of the 2023 budget, will settle under strict conditions the Eskom debt of R254 billion from 2023/24 to 2025/26.
Godongwana didn’t allocate bailouts for struggling state-owned enterprises, describing the current situation at Transnet as “dysfunctional.”
The Minister also hinted that tax might increase in the next financial year, “due to the current low revenue collection.”
