This document discusses public debt in South Africa. It defines public debt and describes the size and composition of South Africa's public debt over time. It explains different theories of public debt and costs associated with public debt management. It identifies the goals of public debt management in South Africa as minimizing debt costs, maintaining macroeconomic stability, and developing domestic financial markets.

2. • Define public debt
• Describe salient characteristics of the size, composition,
and nature of public debt in South Africa
• Explain and compare different theories of public debt and
evaluate them critically
• Argue the relative merits of debt and tax financing of
government expenditure
• Define public debt management
• Identify and describe the different types of public debt
cost
• Identify the goals of public debt management and discuss
their pursuance, with special reference to South Africa.

3. • Treasury bill
• Government bonds
• Zero-coupon bonds.
Public debt may be defined as the sum of all the outstanding financial
liabilities of the public sector in respect of which there is a primary legal
responsibility to repay the original amount borrowed (sometimes
called the principal of debt) and to pay interest (sometimes called debt
servicing).

4. Period Public debt (year-end) as % of
GDP, period average
1960 – 69 44.7
1970 – 79 39.7
1980 – 89 32.4
1990 – 94 41.1
1994 – 1999 49.0
2000 – 2004 40.9
2005 – 2009 29.0
2010* 33.5
* Preliminary figure Source: South African Reserve Bank, Quarterly Bulletin

5. • Debt trap
• Ownership distribution
• Current expenditure
• Capital expenditure
• Net worth
• Net indebtedness
• Consul.

6. • Inter-temporal burden
• Domestic or internal debt
• Foreign or external debt
• Internal vs external debt and the burden on future
generations
• Inter-temporal burden
• Fiscal neutrality and Ricardian equivalence
• Fiscal activism and Keynsian demand management
• The crowding-out phenomenon
• The public choice view.

9. • Allocation efficiency
• Distribution (equity)
• Macroeconomic stability.

10. Objectives
• Minimisation of state debt cost
• Macroeconomic stability
• Development of domestic financial markets
• Financial credibility.

11. • P = E/I
• Primary dealers or market makers
• Government net worth
• Mark to market
• Discount price
• Bond discount
• Foreign exchange cost.

13. • Horizontal or flat
• Negatively sloped or inverse
• Upward sloped or positive.

14. Two questions
• Can the country service its debt?
• Will the country service its debt?

15. • Explicit
– Government guarantees on foreign exchange borrowings
• Implicit
– No contractual obligation to provide assistance but does so.