The IMF has reiterated its view that SA’s public debt level will not stabilise as the National Treasury has projected in successive budgets, but will rise to 88% of GDP by 2030 unless the government implements tighter fiscal policy.
But its latest Fiscal Monitor, released on Wednesday, paints an even more alarming picture of global public debt, warning it could reach levels last seen in World War 2 “amid substantial policy uncertainty and a shifting economic landscape”.
It has sounded the alarm too on the “ripple effects” of tighter and more volatile US market conditions on emerging market and developing economies, which could face higher borrowing costs, especially economies that do not improve their public finances.
“In this volatile landscape, countries will need to first and foremost put their own fiscal house in order,” the Fiscal Monitor said, while the director of the IMF’s fiscal affairs department, Vitor Gaspar, said ministers of finance had to act urgently and decisively. “They face stark trade-offs and painful choices.”
Global public debt, at more than $100-trillion, is now projected to exceed 95% of GDP this year. This will climb to almost 100% by 2030, but could reach 120% or more in worst-case scenarios.
The IMF’s projections on SA’s debt level are worse than its previous forecasts in January and worse than those of the Treasury.
IMF economist Era Dabla Norris said the general government deficit in SA was about 6% in 2024 and the IMF projects it at 6.6% in 2025, driven mainly by higher spending, though this is subject to considerable uncertainty.
“Our projections are based on much more conservative assumptions regarding the buoyancy of the tax system as well as the extent of primary spending compression that can be undertaken,” she said. “So that really accounts for the differences in projections between the two countries and for the path of debt going forward.”
The IMF, which this week downgraded its SA growth forecast to just 1% for this year and 1.3% next year, warned in January that without more concrete spending cuts, SA’s deficits would stay high and the debt ratio would not stabilise over the medium term.
Consolidation
It called for SA to implement a more ambitious fiscal consolidation programme that would reduce its public debt over the next five to 10 years to 60%-70% — in line with common ceilings for investment-grade developing markets.
“Lower debt is key to bolstering the capacity to support the economy when shocks occur, helping avoid disruptive future adjustment. It is also instrumental to reducing crowding out of private investment and lowering debt service costs to make space for critical spending needs for infrastructure, education or health which are key to reducing inequality,” the IMF said in its January Article IV annual report on SA.
Dabla Norris also said it was important for governments implementing fiscal reforms that would affect people’s pockets to communicate these upfront to ensure public trust, as well as to put compensatory mechanisms in place for the most vulnerable.
The Fiscal Monitor said a gradual fiscal adjustment within a credible medium-term framework was crucial for most countries to reduce debt, build fiscal buffers against uncertainties, accommodate priority spending and improve long-term growth prospects.
Update: April 23 2025
This story has been updated with new information.
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