History of South Africas National Debt and Budget Deficit since 1994

Document Type:Thesis

Subject Area:Engineering

Document 1

The paper begins with a historical assessment of South Africa’s national debt. The second part of the paper outlines South Africa’s national debt and budget deficit and compares the identified values to other countries. The third section of the paper discusses South Africa’s government expenditure as a share of the GDP. The final section of the paper highlights the impacts of a high budget deficit and continuous rise in national debt levels. Historical Assessment of South Africa’s National Debt Level According to Roux (2016), South Africa is the economic hub of Africa following the rationale that it has one of the most vibrant economies in the region. 41) Figure 2 above shows a comprehensive historical assessment of South Africa’s national debt.

Sign up to view the full document!

According to the nation’s national treasury the government, debt has been on an increasing trajectory from the year 2006 all through to the year 2018. In as much as a country's economic growth is influenced by the use of debt, a progressive high debt level for the provision of consumer goods at the expense of capital goods is detrimental to the future growth of any country (D’Agostino, Dunne & Pieroni, 2016, p. South Africa’s National Debt and Budget Deficit and Comparison to Other Countries According to Biza, Kapingura and Tsegaye (2015, p. 53), a budget deficit occurs when a country's revenues are less than its expenditure. A Comparative Assessment of National Debt to GDP for Various Countries 2017 (Statista, 2018) South Africa’s national debt ration to its GDP in 2017 was about fifty-three percent a figure that is too high as compared with those of other African states as well as different countries around the globe.

Sign up to view the full document!

Countries with low debt to GDP ratio demonstrate an excellent performance as far as their economies are concerned. For instance, Botswana national debt to GDP ratio stood at 15. 45% with that of Algeria being 17. 72%, UAE stood at 20. In South Africa, the overall government expenditure has been on an increasing trajectory with the levels barely reaching 20% of its gross domestic product. Between 1960 and 2018, South Africa’s current government expenditure has averaged ZAR 316,778. 16 Million, reporting an all-time high of ZAR639964 Million in Q2 of 2018 financial year and ZAR65991 Million record low in Q1 of 1960 fiscal year. As a percentage of the GDP, SA’s government spending between 1960 and 2016 averaged 16. 05%, with a high of 20. The resultant effect is that the ramifications will negatively affect the citizens.

Sign up to view the full document!

A developing country also needs to have a vibrant private sector. However, a high budget deficit leads to crowding out of the sector, as private entities such as financial institutions will have no money to invest in the private areas. A historical assessment of South Africa’s performance reveals a continuous rise in its national debt as well as continued budget deficits. The significance of continued high debt is poor economic performance due to high taxation that may also lead to low incomes for the households in South Africa. P. and Pieroni, L. Government spending, corruption and economic growth.  World Development, 84, pp. Global Economy (2018).  Countries with the lowest national debt 2017 | Statista. [online] Statista. Available at: https://www. statista. com/statistics/273488/countries-with-the-lowest-national-debt/ Trading Economics (2018).

Sign up to view the full document!

From $10 to earn access

Only on Studyloop

Original template