South African Finance Minister Tito Mboweni delivered a grim assessment of the nation’s finances in a special adjustment budget that forecast a deep recession, plunging tax revenue and surging state debt.
Gross Domestic Product is projected to contract 7.2% this year, the most in almost nine decades, with a rebound to 2.6% growth next year.
A 15.7% consolidated budget deficit is expected this fiscal year, while the gross debt-to-GDP ratio is set to reach 81.8% this year and peak at 87.4% in 2023-24.
“We have accumulated far too much debt; this downturn will add more,” Mboweni said Wednesday in a speech to lawmakers in Cape Town. “Our Herculean task is to stabilize debt.”
The rand weakened as Mboweni spoke, declining as much as 0.9% against the dollar.
South Africa was already hit by recession and contending with power shortages when the coronavirus pandemic struck.
Turnaround efforts were upended when the government imposed a stringent lockdown in late March to try and slow the disease’s spread.
While some restrictions have since been eased, many businesses have already gone bust and widespread job losses are set to worsen a 30.1% unemployment rate.
(With input from Bloomberg)