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Home » Featured IND » South Africa’s budget deficit, debt seen widening as virus hits economy

South Africa’s budget deficit, debt seen widening as virus hits economy

South Africa’s budget deficit is projected to widen sharply while debt is seen ballooning significantly, the Treasury said on Wednesday, as the COVID-19 pandemic further stifles the recession-hit economy.

In a supplementary budget in response to the coronavirus crisis, the Treasury projected the budget deficit would widen to 14.6% of gross domestic product in the current 2020/21 fiscal year, from a shortfall of 6.8% of GDP seen in February.

The projected deficit would be the highest in South Africa’s post-apartheid era.

The Treasury said gross government debt will rise to 81.8% of GDP in the current fiscal year from 63.5% last year.

“Debt is our weakness. We have accumulated far too much debt; this downturn will add more,” Finance Minister Tito Mboweni said in his budget speech.

President Cyril Ramaphosa announced a 500 billion rand relief package in April, equivalent to 10% of South Africa’s GDP, to cushion the economic blow of the pandemic on an economy that was in recession when the virus outbreak hit the country.

A strict nationwide lockdown from late March severely curtailed production across key sectors like mining and retail, with the Treasury now predicting a GDP contraction of 7.2% this year.

Some lockdown restrictions have since been eased to allow key sectors to resume operations.

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