South Africa needs to borrow US$7 billion from international finance institutions to plug the funding hole caused by the economic recession and worsened by increased government spending in the fight against the coronavirus pandemic, Finance Minister Tito Mboweni has said in Cape Town.
Mboweni said this when he tabled a supplementary budget in the National Assembly in Cape Town on Wednesday.
South Africa, whose economy was in the doldrums long before the pandemic hit the country in March this year, has had to cushion the economy with US$30 million in relief funds to households and businesses, Mboweni told the House.
This unbudgeted for expenditure, he added, left the country in more debts than anticipated, resulting in the government having “a projected total consolidated budget spending, including debt service costs, that will exceed US$118 billion for the first time ever.”
Mboweni said the government is projecting that South Africa’s gross national debt will be close to US$235 billion, or 81.8 percent of Gross Domestic Product (GDP) by the end of the current fiscal year compared to an estimate of US$206 billion initially projected in February.
“Without external support, these borrowings will almost entirely consume all of our annual domestic saving, leaving no scope for investment or borrowing by anyone else. For this reason, we need to access new sources of funding,” Mboweni said.
He added: “Government intends to borrow about US$7 billion from international finance institutions to support the pandemic response.
NM/jn/APA