’Can we not just spend our way out of the present crisis?’

CAPE TOWN – Finance Minister Tito Mboweni, when delivering his Medium-term Budget Policy Statement, cautioned that an uncontrolled increase in borrowing costs would harm small businesses, ordinary South Africans and the poor the most.

Mboweni said the Cabinet remained resolute and would walk through the narrow gate towards fiscal sustainability.

“We must be careful to avoid the fate of countries like Argentina and Ecuador that defaulted on their debt this year.

“Countries that find themselves in default see sharp GDP contractions and currency depreciations. On current trends, more of our taxes are being transferred to bondholders, rather than to critical services for our people,” he said.

Mboweni said in 2009, when the country had debt of 31.5 percent of gross domestic product (GDP) and the real yield on government debt was about 3 percent and every rand of government spending got R1.60 in GDP.