S. Africa to use contingency reserves to tackle debt

South Africa plans to use future withdrawals from its Gold and Foreign Exchange Contingency Reserve Account to tackle debt, according to Reuters citing Finance Minister Enoch Godongwana.

The country is wrestling with a faltering economy and substantial debt as it approaches a general election on May 29. This pivotal event may mark the first instance since the end of apartheid 30 years ago where the ruling African National Congress party risks losing its parliamentary majority.

Recent GFECRA framework change allows 150 billion rand ($8 billion) drawdown over 3 years. No aid for Eskom or Transnet.

Debt service costs alarmingly high. Next year’s budget might see significant adjustments. Fiscal consolidation planned away from elections, signaled for February 19, 2025.

Focus on streamlining social spending. Economic growth forecast at 1.6 per cent for 2024, but risks from intensified load shedding or Middle East tensions. Droughts won’t impact food inflation, for now.