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Economic analysis of the budget - how much trouble are we in?

24 June 2020 6:44 PM
Tags:
Tito Mboweni
Tax
Lockdown
COVID-19
Emergency Budget
Supplementary Budget

'An unsustainable fiscal position' .

What are the big problems or gaps in South Africa's budget?

Busiswe Radebe, Nedbank economist, tells The Money Show that our economy is indeed a horror show - and the real problem is the debt spiral.

I think in the supplementary budget review they said if this spiral is not stopped it is likely that some state-owned entities will collapse - this will trigger a call on guaranteed debt obligations.

Busiswe Radebe - Nedbank economist

Failure to substantially reduce costs, address long-standing governance failures, prosecute state capture participants, and undertake profound operational reforms, has contributed to an already unsustainable fiscal position...if growth is going to shrink by 7.2 per cent it is a big deal.

They gave us two scenarios - a passive scenario - if we just let things slide and an active scenario. If I look at those scenarios...by 2028 gross debt as a percentage of GDP is going to be about a 140.7 per cent and even if we do something - it's going to be 73.5 per cent.

Busiswe Radebe - Nedbank economist

If we look at household debt - you want to keep that at about 30 per cent of your total income - here if you look at government debt and GDP it's going to be GDP and then some...what you want to do is keep that debt below 60 per cent of GDP.

Busiswe Radebe - Nedbank economist

The reason why this a horror show is what it's been spent on... if you said to me you're going to get a lot of debt and spend on bubblegum I'm going to be angry...so a lot of this money is spent on actually paying government salaries - it's bubblegum...

Busiswe Radebe - Nedbank economist

We are like a cat with nine lives - every time I think this is now the end, we manage to get something out but I think what this has shown is, I'm not surprised really at these numbers - it was a horror show before Covid. What Covid showed us is just how bad things are.

Busiswe Radebe - Nedbank economist
Finance Minister Tito Mboweni delivering his supplementary Budget speech in Parliament on24 June 2020. Picture: GCIS.

Listen to the interview below.

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24 June 2020 6:44 PM
Tags:
Tito Mboweni
Tax
Lockdown
COVID-19
Emergency Budget
Supplementary Budget

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