South African Finance Minister Tito Mboweni is set today to table a Special Adjustment Budget meeting as the county faces a sovereign debt crisis amid the COVID-19 pandemic.
South Africa’s current economic situation is dire; the economy has dramatically deteriorated since the 2020 budget was introduced in February. Mboweni is expected to reveal that the current debt-to-GDP ratio stands at 80.5%, a staggering 20% increase in just four months. Furthermore, reduced tax revenue, rising health care costs and a recent ratings downgrade are projected to result in a $16.5 billion budget deficit for this fiscal year. As such, Mboweni worked to radically tamper domestic expectations for discretionary spending as significant cuts and re-appropriations will have to made to address this crisis.
Trepidation by the governing African National Congress tripartite alliance to seek assistance from the World Bank and IMF has placed an enormous burden on domestic institutions and politicians. In order to create short-term stability and long-term sustainability, Mboweni will likely propose a zero-based budgeting scheme, wherein the entire national budget starts at zero and only fully financed spending programs are added. Today’s meeting will signal whether there is sufficient political will to self-impose such tight austerity measures—or to accept an international bailout.
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Julian is a Research Analyst for The Daily Brief where he is a regular contributor. As a researcher and writer, Julian specializes in the political economy of East Asia and global macroeconomic developments.