Foreign funds will be sought to finance public sector investment and a larger budget deficit, which is likely to arise from an economic slowdown, the Business Day reported on Friday.

The government would play a more active role in raising foreign funds to finance the current account deficit "and ensure the continuity of an ambitious public sector capital investment programme," Business Day quoted treasury budget office head Kuben Naidoo as saying.

The more interventionist strategy was a significant shift in the treasury's approach to the current account deficit problem, because previously it could count almost entirely on private capital inflows, the newspaper said.

There has been mounting concern over South Africa's vulnerability to a shock on the current account of the balance of payments -- 7,3 percent of gross domestic product (GDP) last year -- as exports fell and foreign capital inflows decreased.

Last year, South Africa received R65,6 billion in net foreign capital inflows, but so far this year there had been a flight of R52bn.

A large current account deficit not financed by capital inflows would be "a severe constraint to growth, which economists predict will fall sharply next year," the newspaper reported.

Concern over the funding of the current account deficit has led Finance Minister Trevor Manuel to warn that South Africa could not chase away foreign investors through ill-advised fiscal and macroeconomic policy pronouncements.