South Africa’s budget deficit, debt seen widening as virus hits economy

PUBLISHED: Wed, 24 Jun 2020 18:57:00 GMT

South Africa’s budget deficit is projected to widen sharply while debt is seen ballooning significantly, the Treasury said on Wednesday, as the COVID-19 pandemic further stifles the recession-hit economy.

In a supplementary budget in response to the coronavirus crisis, the Treasury projected the budget deficit would widen to 14.6% of gross domestic product in the current 2020/21 fiscal year, from a shortfall of 6.8% of GDP seen in February. 

The projected deficit would be the highest in South Africa’s post-apartheid era.

The Treasury said gross government debt will rise to 81.8% of GDP in the current fiscal year from 63.5% last year.

“Debt is our weakness. We have accumulated far too much debt; this downturn will add more,” Finance Minister Tito Mboweni said in his budget speech.

President Cyril Ramaphosa announced a 500 billion rand relief package in April, equivalent to 10% of South Africa’s GDP, to cushion the economic blow of the pandemic on an economy that was in recession when the virus outbreak hit the country.

A strict nationwide lockdown from late March severely curtailed production across key sectors like mining and retail, with the Treasury now predicting a GDP contraction of 7.2% this year.

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