South Africa Finance Minister Presents More Optimistic 2021/22 Spending Plan

JOHANNESBURG--South Africa's finance minister presented a more optimistic spending plan for the 2021/22 fiscal year on Wednesday, saying the coronavirus pandemic's impact on growth wasn't as bad and government debt won't grow as quickly as he expected in October.

Africa's most developed economy is estimated to have shrunk by 7.2% last year, compared with the 7.8% contraction forecast in the medium-term budget proposed in October. This year, gross domestic product is expected to grow by 3.3%, also up from the 3.1% growth forecast in October.

Because of those growth revisions--and slightly lower deficit forecasts--South Africa now expects its government debt to peak at 88.9% of GDP in the 2025/26 fiscal year, before declining slightly in the following years.

"Compared to October last year we are in a much better situation," Finance Minister Tito Mboweni said.

Still, the fiscal impact of the pandemic in South Africa, which has recorded more Covid-19 cases and deaths than any other African country, has been severe. The government deficit is likely to reach a record 14% of GDP by the time the current fiscal year ends in March and decline to 9.3% in 2021/22.

Government debt will jump to 80.3% of GDP by the end of this fiscal year, from 63.% a year earlier. "We owe a lot of people a lot of money," Mr. Mboweni said, while warning that the country's "public finances are dangerously overstretched."

South Africa is planning to spend some 10.3 billion South African rand ($708.1 million) to buy and deliver Covid-19 vaccines over the next two years. It is also building up a ZAR12 billion reserve for more vaccine purchases and cater for other emergencies.

Mr. Mboweni also announced a further ZAR7 billion bailout for the struggling state-owned Land Bank.

Write to Gabriele Steinhauser at gabriele.steinhauser@wsj.com


  (END) Dow Jones Newswires
  02-24-21 0810ET
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