Johannesburg – Finance Minister, Tito Mboweni has again flagged a potential sovereign debt crisis in South Africa.
Mboweni’s remarks came as the Reserve Bank warned that SA’s financial stability is at risk if the government’s consolidation efforts are unsuccessful.
“We have to avoid a situation where the debt to GDP ratio comes to over 100%. I mean that would be a disaster, it means we would be facing a sovereign debt crisis,” said Mboweni.
“The bulk of the government’s bonds, which the government issues in South Africa, is held by domestic banks and institutions. In the event of a sovereign debt crisis, it means you are immediately facing a banking crisis.”
The minister says government must curb the public sector wage bill which is weighing heavily on the debt.
He’s previously raised the alarm on government’s limited capacity to act as a backstop in the event of financial sector distress.