https://en.sputniknews.africa/20240221/south-africa-to-draw-down-8-bln-from-reserve-bank-to-control-increasing-debt-1065192250.html
South Africa to Draw Down $8 Bln From Reserve Bank to Control Increasing Debt
South Africa to Draw Down $8 Bln From Reserve Bank to Control Increasing Debt
Sputnik Africa
As the financial year comes to an end for some countries, they are taking stock of the past year and planning for future budgets. For example, it was announced... 21.02.2024, Sputnik Africa
2024-02-21T17:55+0100
2024-02-21T17:55+0100
2024-02-21T17:55+0100
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The South African government plans to withdraw nearly $8 billion from the the central bank's contingency reserves over the next three years to control increasing debt, as announced by the National Treasury on Wednesday.The GFECRA captures gains and losses on the country's foreign currency reserve operations. It now holds a balance of more than 500 billion rand (about $26.4 billion), which is greater than the potential losses from rand appreciation, as stated by the Treasury.The government will receive 100 billion rand (approx. $5.3 billion) in the coming fiscal year, which ends in March 2025, and 25 billion rand (approx. $1.3 billion) in each of the following two years.Treasury Director-General Duncan Pieterse told reporters that the government was essentially substituting the use of the reserve account for more costly borrowing.The Treasury also suggested implementing 15 billion rand (almost $8 million) in tax increases in the upcoming financial year to address fiscal constraints.Furthermore, projected consolidated spending is expected to rise from 2.4 trillion rand (nearly $127 billion) in 2024/2025 to 2.6 trillion rand ($137.5 billion) in 2026/2027, with higher allocations to sectors such as health, education, and the extension of a social grant program initiated during the COVID-19 period.Gross debt is expected to stabilize at 75.3% of GDP in 2025/2026, down from 77.7% in November.The projected consolidated budget deficit for the current fiscal year ending in March remains at 4.9% of GDP, in line with November forecast. The economy is expected to grow by 1.3% in 2024, up from an estimated 0.6% in 2023. Furthermore, The economy is also expected to grow by around 1.6% over the next three years.One significant impediment to expansion has been frequent power outages, which have negatively impacted businesses of all sizes, with Eskom experiencing its most severe outages to date last year.South Africa is experiencing a logistics crisis due to equipment shortages, maintenance backlogs, and widespread vandalism at Transnet, a state-owned company responsible for freight rail and port services.Moreover, "persistently low economic growth is South Africa's central policy challenge," the minister stated, adding that the economy needs "massive investment" to grow and create jobs.The latter seems to be an acute issue in the country, as up to more than 10,000 jobs can be reduced due to restructure in South Africa's platinum group metals industry.
https://en.sputniknews.africa/20240221/uganda-to-borrow-33-billion-for-next-fy-over-30-increase-from-last-year-1065185600.html
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South Africa to Draw Down $8 Bln From Reserve Bank to Control Increasing Debt
As the financial year comes to an end for some countries, they are taking stock of the past year and planning for future budgets. For example, it was announced that Uganda will refer to external and internal borrowing, this time to the amount of about $3.3 billion to support the economy. Now let's look at South Africa's financial results and plans.
The
South African government plans to withdraw nearly $8 billion from the the central bank's contingency reserves over the next three years to control increasing debt, as
announced by the National Treasury on Wednesday.
"We will draw down R150 billion of the GFECRA [Gold and Foreign Exchange Contingency Reserve Account] balance once we have ensured that sufficient buffers are available to absorb exchange rate swings and the solvency of the Reserve Bank is not compromised," Finance Minister Enoch Godongwana said while presenting the 2024 budget.
The GFECRA captures gains and losses on the country's foreign currency reserve operations. It now holds a balance of more than 500 billion rand (about $26.4 billion), which is greater than the potential losses from rand appreciation, as stated by the Treasury.
The government will receive 100 billion rand (approx. $5.3 billion) in the coming fiscal year, which ends in March 2025, and 25 billion rand (approx. $1.3 billion) in each of the following two years.
Treasury Director-General Duncan Pieterse told reporters that the government was essentially substituting the use of the reserve account for more costly borrowing.
The Treasury also suggested implementing 15 billion rand (almost $8 million) in
tax increases in the upcoming financial year to address fiscal constraints.
Furthermore, projected consolidated spending is expected to rise from 2.4 trillion rand (nearly $127 billion) in 2024/2025 to 2.6 trillion rand ($137.5 billion) in 2026/2027, with higher allocations to sectors such as health, education, and the extension of a social grant program initiated during the
COVID-19 period.
Gross debt is expected to stabilize at 75.3% of GDP in 2025/2026, down from 77.7% in November.
The projected consolidated budget deficit for the current fiscal year ending in March remains at 4.9% of GDP, in line with November forecast. The economy is expected to grow by 1.3% in 2024, up from an estimated 0.6% in 2023. Furthermore, The economy is also expected to grow by around 1.6% over the next three years.
One significant impediment to expansion has been
frequent power outages, which have negatively impacted businesses of all sizes, with Eskom experiencing its most severe outages to date last year.
South Africa is experiencing a logistics crisis due to equipment shortages, maintenance backlogs, and widespread vandalism at Transnet, a state-owned company responsible for freight rail and port services.
"Government is making the most out of very limited resources," Godongwana said. "The budgets we have tabled since 1994, have been about securing the goal of growing the economy, so that we can do more to address the inequalities and deprivation that still scar our society and undermine the promise of democracy."
Moreover, "persistently low
economic growth is South Africa's central policy challenge," the minister stated, adding that the economy needs "massive investment" to grow and create jobs.
The latter seems to be an acute issue in the country, as up to more than 10,000
jobs can be reduced due to restructure in South Africa's platinum group metals industry.
