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IMF warns that more SOEs bailouts spell doom for SA fiscal policy

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IMF warns that more SOEs bailouts spell doom for SA fiscal policy

Photo by Reuters

31st July 2018

By: African News Agency

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The International Monetary Fund (IMF) on Monday expressed concerns about South Africa's fiscal policy, saying that policy uncertainty and regulatory overreach, inefficiencies in government companies, labour market rigidities, insufficient competition and corruption hindered private investment.

The IMF published the outcome of its Article IV consultation with South Africa that took place between 28 May and 11 June this year. The IMF visits each of its member countries annually, to conduct an economic and financial assessment of government policies and provide policy recommendations. 

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The IMF said it was concerned by the rapid increase in public debt as a share of GDP, which has doubled over the last decade, depleting fiscal buffers and constraining fiscal policy space. It said that risks related to potential State-owned enterprises bailouts will further constrain fiscal policy.

The IMF also said that monetary policy authorities should be cautious given fiscal risks and the need to build buffers and welcomed the increased focus on lowering inflation expectations. The IMF's growth forecast of 1.5 percent for 2018 was unchanged from its World Economic Outlook (WEO) projection in April.

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President Cyril Ramaphosa has embarked on an ambitious investment drive which has seen him criss-crossing the world to raise US $100 million in investment, both from foreign and domestic investors, in five years.

 

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