This week’s Budget in South Africa will probably see the government reaffirm its commitment to fiscal consolidation. But we think that officials will struggle to stay on this path in the next couple of years, leaving the debt-to-GDP ratio on an upwards trajectory that could see it hit 100% of GDP by 2025. While an acute debt crisis seems unlikely, policymakers will have to rely on increasingly interventionist measures, such as financial repression, to keep borrowing costs down and the debt position sustainable.
Drop-In (23rd Feb., 15:00 GMT): We’ll be discussing South Africa’s budget, the risks to the country’s debt profile and the potential impact on FX and bond markets in a 20-minute online briefing on Wednesday. Register here.
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