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Debt-service costs on the rise for govt's budget expenditure

The cost of financing public debt is projected to increase from R115 billion to R153 billion in 2017.

The cost of financing public debt is projected to increase from R115 billion to R153 billion in 2017. Picture: Gadeeja Abbas/EWN.

CAPE TOWN - Debt-service costs continue to be the fastest-growing component of government's main budget expenditure, increasing by 10,1 percent in nominal terms over the medium term.

According to Treasury's budget review document, the cost of financing public debt is projected to increase from R115 billion to R153 billion in 2017.

As a percentage of GDP, net debt has grown from 21,8 percent at the start of the financial crisis in 2008/2009 to 40,8 percent in 2014/2015.

Economist Dr Azar Jammine said a rising interest bill meant there was less money available for government to spend on service delivery.

"Government is going to be spending 10,1 percent per annum more each year on paying interest and that compels it to reduce the growth in for example, education and healthcare spend, to less than 7 percent per year and that is an indication of how the increase in the interest bill is crowding out the ability to spend on other more vital areas of spending."

However, Jammine added that the intention with this budget was to put an end to the trend of rising public debt by raising taxes and reducing the rate of increase in public sector wages.

"And so it will be an overstatement to say government is drowning in debt quite yet", he said.

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