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Debt to GDP ratio still sustainable

Cape Town - South Africa's debt to gross domestic product ratio remains sustainable and the net national debt is projected to stabilise at 44% of GDP in 2017/18, according to Wednesday's mini budget.

The main budget net borrowing requirement is projected to increase from R168.5bn in 2013/14 to R183.9bn in 2014/15 before declining to R164.9bn in 2016/17. National Government net debt is projected to reach 39.3% of GDP in 2014/14 and 43.9% in 2016/17.

An additional amount of R743m is provided for state debt costs in the adjustments at the halfway mark of the budget year. Debt service costs rise from R100.5bn in 2013/14 tot R135.4bn in 2016/17.

The budget document says the deterioration in the economic growth outlook as well as rising bond yields have increased the debt to GDP ratio. Debt is expected to stabilise later than previously anticipated and at a higher level.

To limit external vulnerability, debt is largely denominated in domestic currency. Maturities are increasingly long term.

Over the medium term, government’s debt management strategy will focus on minimising refinancing risk to accommodate redemptions. To mitigate this risk beyond the medium term, government will continue to build cash reserves and to switch short term for longer term debt if market conditions allow.

State-owned companies are at the centre of SA infrastructure expansion, but they are expected to borrow on the strength of their balance sheets, rather than being funded from the fiscus.
 
 
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