Budget deficits, government debt and fiscal sustainability in South Africa
Whether the federal government’s budget is fiscally sustainable or not is generally measured by the annual in the ratio of debt held by the public to GDP (Levit 2011) . This is known as the debt-to-GDP ratio. Budget deficits will generally increase the level of total government debt. Temporary increases in the debt-to-GDP are not necessarily problematic. However, if the debt to GDP ratio is persistently rising, it is considered unsustainable. If GDP growth equals or exceeds the annual budget deficits as a percentage of GDP, meaning that the debt to GDP ratio would generally remain constant or fall, then the budget is considered sustainable. While there is no level of debt to GDP that is universally regarded as optimal, some budget reform proposals recommended maintaining the debt to GDP ratio at 60% or less going forward. Net Lending (+) and net borrowing (-) (% of GDP) South Africa’s net lending as a percentage of GDP was almost one between 2006 and 2007. It then fe