Reserve Bank governor Lesetja Kganyago and Finance Minister Tito Mboweni have both raised warnings about South Africa’s economic trajectory, especially regarding unsustainable levels of debt.
Speaking on Thursday at a virtual seminar hosted by the Wits School of Governance, Kganyago said that South Africa was heading into an Argentina-type crisis where it becomes impossible to pay debts.
He warned that South Africa could mirror the South American country, ‘where ideological conflicts and unstable macroeconomic policies produced a steady economic decline’.
He also said that South Africa had failed to learn lessons from the past decade of economic decline, and that South Africans had been getting poorer since 2013.
‘In the world, we are sliding backwards,’ the governor said.
Mboweni reiterated these warnings, saying the country faced a sovereign debt crisis unless drastic changes were made. According to Business Day, Mboweni also said on Facebook yesterday that the deficit was like the mouth of a hippopotamus and that it would be a ‘Herculean task’ to close it.
In a presentation on Friday, National Treasury officials said South Africa was expected to record a budget deficit of 14% of GDP, double the 7% initially predicted before the Covid-19 crisis.
[Picture: Prensa Banco Central de Chile, https://commons.wikimedia.org/w/index.php?curid=80639117]