Neelam Rahim | neelam@radioislam.co.za

2-minute read
07 January 2024 | 12:43 CAT

Image: FurtherAfrica

In a dynamic economic landscape, South Africa’s debt profile is undergoing a notable shift, raising concerns about the potential impact on the country’s financial stability.

As the government increasingly taps into foreign currencies for funding, questions arise about the risks and strategies involved.

South Africa’s National Treasury is considering withdrawing as much as half of the R497 billion contingency reserves held by the central bank to help reduce the government’s debt load or fund public-sector wages.

The withdrawal is being considered as South Africa prepares for elections and when public finances are under significant strain.

The government is collecting less revenue because an energy shortage and logistics constraints are curtailing mining and other companies’ profitability. At the same time, the state is facing rising debt-service costs and a growing civil-servant wage bill.

Drawing down on the account in a low-growth-trapped economy like South Africa, where spending needs are increasing on an annual basis, offers a short-term fix at a time when a longer-term fix solution is needed, said Jannie Rossouw, professor at Wits Business School at the University of the Witwatersrand.

“It’s a one-off use,” Rossouw said. “What we really need is an investment-friendly government. A government that invests in the economy so that you can have more active economic growth that will grow the tax base so that the government can have more revenue.”

Listen to the full interview on Sabahul Muslim with Moulana Habiba Bobat.