SA may introduce its first-ever 'debt ceiling' – here's what to expect

The SA Treasury has confirmed to the IMF that they would be open to introducing a 'debt ceiling' for the first time in the country's history, radically changing the way this country manages its borrowing limits.

Treasury responds to IMF loan


Amongst other commitments, Tito Mboweni has also told the IMF in his letter of intention:

  1. South Africa wants to reverse the upward trajectory of the public debt-to-GDP ratio by possibly introducing a debt ceiling.

  2. The government continue to seek a reduction of the public wage bill.[*]The amount of money going towards SOEs will be 'rationed'.[*]The country – and the IMF – can now expect to see an implementation of economic structural reforms.


What is a debt ceiling?


Quite simply, introducing this measure would set a self-imposed limit on how much the government can borrow. A yearly cap can be established, and should the 'debt ceiling' need to be breached, the ANC would have to gain Parliamentary approval first – the proposals, meanwhile, have the DA's full backing.


The opposition party actually suggested this measure in their Fiscal Responsibility Bill, tabled back in March. Shadow finance minister Geordin Hill-Lewis has urged Mboweni to cooperate with his political rivals and promised to back the Treasury if they do decide to implement a debt ceiling.


"The IMF's warning on the urgent need for structural reform gives Minister Mboweni a date with destiny in his October MTBPS in which he has to make firm commitments to remove impediments to growth and fiscal sustainability. We hope the minister will now support a debt ceiling, as previously proposed by the DA."
"Turning South Africa's economy around is a national effort which requires a non-partisan approach from the Treasury under Mboweni. The DA has made a series of proactive economic proposals to help ignite our economy, which proposals should now be seriously considered for implementation."Geordin Hill-Lewis