Godongwana warns of dire financial crisis ahead of budget statement

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Finance Minister Enoch Godongwana delivered a stark warning about South Africa’s deteriorating public finances in a keynote address at the Kgalema Motlanthe Foundation annual forum.

With the Medium-Term Budget Policy Statement scheduled for next week, Godongwana painted a grim picture of the current state of government debt, cautioning that imminent repayments could deplete all available government finances by the end of March 2024.

Godongwana stressed the necessity of increasing borrowing to prevent drastic reductions in government expenditure. He highlighted the challenges stemming from weak economic growth, which has led to decreased tax revenues despite the mounting government expenditure.

The impending Medium-Term Budget Policy Statement is expected to unveil measures aimed at curbing excessive spending, as the minister emphasized the urgency of maintaining some current expenditure levels.

Expressing deep concern about the escalating debt levels, Godongwana pointed out that debt servicing costs were averaging a staggering R366 billion annually, exceeding the annual allocation to the Department of Police. He further warned that with several government debt instruments maturing this year, the government could soon face a critical shortage of funds.

Economists have suggested that these measures are likely intended to support the government’s extension of Social Relief of Distress grants. With the national elections on the horizon, the government is expected to implement budget cuts across various departments and state institutions while safeguarding pro-poor social projects.

The forthcoming budget statement is anticipated to outline a comprehensive strategy to navigate the complex financial landscape and ensure the sustainability of critical social welfare programmes, while fostering economic stability in the face of mounting fiscal pressures.

DA will keep a close watch on the Medium Term Budget Policy Statement: