12 March 2010
	101 Debt:GDP ratio By Evan Pickworth

Why is the debt:GDP ratio important? It gives an idea of the ability of a country to make future payments on its debt. If it were unable to pay its debt, it would default, which could cause a panic in the domestic and international markets. The higher the ratio, the less likely it is that the country will pay back its debt, and the higher its risk of default. SA's debt:GDP ratio is set to increase to over 40% in three to four years, from around 24% until recently. How is it calculated? Various debt:GDP ratios can be calculated. The most commonly used one is government debt divided by gross domestic product, which reflects government's finances. A nother common ratio is the total national debt to GDP, which reflects finances of the nation as a whole. How much does SA debt cost? National government debt service costs are due to increase from R57,6bn in 2009/2010 to R104,02bn in 2012/2013 - rising from 2,4% of GDP to 3,2% of GDP. Can SA handle the debt load? Finance minister Pravin Gordhan thinks so. He says even with the increase to over 40%, SA is still in a better position than many countries around the world, where the ratio has gone to over 100% during the credit crisis. FM research, Investopedia, Wikipedia