OWN CORRESPONDENT, Cape Town | Monday 12.15pm.
THE state’s debt burden has almost doubled over the past five years, Finance Minister Trevor Manuel told Parliament on Monday.
Two of the main reasons are the rand’s devaluation and high interest rates, according to Sake-Beeld.
Replying to a question in the national council of provinces, Manuel said State debt would amount to R363,9-billion at the end of March – 55,6% of South Africa’s projected gross domestic product (GDP). Five years ago, when the new government took over, state debt stood at R189,9-billion or 48% of GDP.
Over the past year, the debt increased by R888-million, even before the state had negotiated new loans. The sharp rise in local interest rates because of the international monetary crisis and the rand’s devaluation raised the cost of the debt.
Additionally, lower exchange rates mean more rands must be paid to foreign creditors on existing loans.
The increase in the interest on debt was much higher than government expected — estimated to be R48-billion this year.
To the loan debt of R363,9-billion is added R12bn from losses on contingency reserves in gold and the foreign exchange account, bringing total state debt to R375,9-billion. The losses will be made good by the issuing of new government bonds.
Most of the debt – 95,6% – is owed domestically. The remaining 4,4% consists of foreign loans. Despite the growing pressure being put on foreign countries to write off a portion of the foreign debt, the finance department does not favour this. It does not plan to ask foreign creditors to write off even the debt incurred by the previous regime.
About half of the current foreign debt was incurred during the apartheid era. The department says this debt is minor and does not justify jeopardising South Africa’s standing as a trustworthy borrower.
Asked to identify creditors, Manuel said it was an impossible task.