Recently, government's cash-book deficit rose to a staggering R523 billion for the twelve months ended March 2020 or 10.6% of GDP. This constituted a significant deterioration on the R191bn (3.9% of GDP) recorded at the end of 2018. Government's primary balance—the surplus or deficit before interest rate expenses and one of the most important indicators of fiscal sustainability—this deficit deteriorated to -6.2% of GDP in the year ended September 2020. When real interest rates increase relative to the real growth in GDP, it becomes quite important for government to eliminate / avoid a primary deficit in order to prevent runaway debt servicing costs and a fiscal debt trap.
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