Government foreign borrowing in South Africa

The foreign capital resources which are available to developing countries are generally divided into two broad categories – those which flow to the public sector and those accruing to the private sector. This paper concentrates on assessing whether increased government guaranteed foreign indebtedness is a feasible option for future fiscal policy in South Africa. The macroeconomic role of government foreign borrowing is discussed in section 1. Section 2 elucidates the trends and maturity structure of past public sector indebtedness. Following a historical perspective of the South African government’s foreign borrowing experience, the paper evaluates recent developments in government international borrowing in section 3. Finally, section 4 suggests an approach for managing future governmental external borrowing. It is concluded that the case for increasing public sector foreign indebtedness rests on whether this is accompanied by a judicious selection of policies which aim to ensure that the level of government foreign debt does not exceed the long-run capacity of the government to repay the debt. Bibliogr., notes, ref.