JOHANNESBURG, Oct 25 (Reuters) – South Africa’s finance minister is expected to announce on Wednesday a plan to take on some of Eskom’s colossal debt in a medium-term budget, although analysts say the legally complex move will take time to complete.
State-owned Eskom has been mired in currency crisis for years and has about 400 billion rand ($21. 69 billion) in debt that it cannot pay.
This has required recurring government bailouts that have strained public finances as officials grapple with other tactics to deal with the problem. Read the full story
Economists say much of Eskom’s debt wants to be absorbed by the state to make it financially stable.
“Anything below R150 billion would be considered insufficient,” said Isaah Mhlanga, lead economist at Alexforbes AFHJ. J.
BNP Paribas analysts said it would be for bondholders to join the debt movement.
Economists are also watching whether Finance Minister Enoch Godongwana comes up with new measures for the poor, as civil society teams have pushed for the advent of a universal fundamental source of income benefits.
The Institute for Economic Justice, a Johannesburg-based think tank, says a grant of R350 a month led to the COVID-19 pandemic being above the food poverty line of more than R660 per month, which could charge the state. Another R30 billion a year.
Some economists claim that a temporary extension of the R350 subsidy for social relief of misery could be financed through higher-than-expected revenues from mining taxes.
But overall, analysts expect the government to stick to conservative fiscal policy, as economic expansion is expected to remain weak in the coming years and global financial situations are expected to tighten.
“We expect the fiscal consolidation strategy to be maintained, offering fiscal certainty and sustainability,” local bank FNB said in a study note.
A Reuters vote forecasts that buoyant mining revenues would allow Godongwana to give a narrower budget deficit forecast for this fiscal year.
($1 = R18. 4449)