Analysts’ arguments on the fiscal accounts and current accounting treatment are incorrect
Both writers argue that the manner in which the recent budget accounted for Eskom’s debt relief inappropriately flattered the country’s fiscal outlook.
Many of the core arguments presented in both articles are, in our view, simply wrong. It is worth highlighting those errors, but also refocusing the debate on the core challenge we faced: how should government address Eskom’s persistently weak financial position while enabling it to undertake the necessary investment and maintenance to resolve load-shedding?
Lijane’s column contains several errors. The minister’s budget speech and the 2023 Budget Review make it clear that taking over Eskom’s debt worsens SA’s fiscal path relative to last year’s medium-term budget policy statement . The impact is transparently and fully captured in the gross borrowing requirement, the gross loan debt, debt service costs and the debt-to-GDP ratio.
Correcting these errors is important, but should not detract from a conversation about how the government is addressing Eskom’s persistently weak financial position and enabling it to undertake the necessary investment and maintenance to resolve load-shedding. Second, one should always look at all the fiscal ratios in the Budget Review to get an accurate sense of the fiscal picture over time. Focusing on some, like the primary balance, and not others, like the gross borrowing requirement, creates misunderstanding.
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