RAPID RISE IN DOMESTIC DEBT

MBABANE – Government has recorded a rapid rise in domestic debt in the past four years.

Domestic debt rose more than 100 per cent from E5.8 billion to E13.348 billion between 2017 and last year. When presenting his Budget Speech last Friday, Minister of Finance Neal Rijkenberg reported that total public debt stock was estimated to reach E28.4 billion in 2020/21 which translates to 45 per cent of GDP. Domestic debt accounts for nearly 53 per cent of the E28.4 billion public debt stock forecast in 2020/21. “External debt is expected to account for 47 per cent, which the accumulation is of externally financed capital expenditure as well as newly acquired budget support loans,” said the minister.  Normally, domestic public debt is mainly debt owed to holders of government securities such as treasury bills and bonds.

Publication

At the end of end of third quarter of 2020, this publication had reported that total outstanding bonds increased from E 5.07 billion in the second quarter to E 5.33 billion as of September 30, 2020. Year-on-year, total government bonds outstanding had increased by 65 per cent at the end of the third quarter of 2020. Meanwhile, the rise domestic debt is recorded at a time when government is looking to restructure its expenditure. The priority of the 2021/22 budget is to rationalise and restructure government expenditure as well as enhance domestic revenue collection in line with the Fiscal Adjustment Plan adopted during 2020/21.The budget aims to achieve the fiscal consolidation targets while allowing government to execute its core mandate. Analysts say the potential problems of government borrowing include higher debt interest payments; a need to raise taxes in the future; crowding out of the private sector and – in some cases – inflationary pressures.

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