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SA Needs `Robust Action' to Cut Fiscal Gap, IMF Says

Business Maverick

Business Maverick

SA Needs `Robust Action’ to Cut Fiscal Gap, IMF Says

Commercial buildings and office property stand on the city skyline as night falls, as seen from the 50th floor of the Carlton Centre, in Johannesburg. Photographer: Waldo Swiegers/Bloomberg
By Bloomberg
04 Jun 2019 0

South Africa needs to take “robust actions” to reduce its fiscal deficit and reverse the increase in public debt, the International Monetary Fund said

“The fiscal deficit is set to worsen as weak growth constrains revenue, current expenditure remains rigid, and public enterprises require additional support,” the Washington-based IMF said in an emailed report Monday after staff concluded a visit to the continent’s most-industrialized economy. “As a result, debt pressures are likely to further increase in the near term.”

The National Treasury in February forecast a fiscal gap of 4.5% of gross domestic product for the year starting April 1. If realized, it would be the worst since the 6.3% reported in fiscal 2010.

Weak economic growth and chronically high unemployment mean the state would probably miss its initial revenue-collection targets by more than 42 billion rand ($2.9 billion) in the 2018-19 fiscal year, the Treasury said in February.

Debt-ridden state-owned companies such as power utility Eskom Holdings SOC Ltd. are also placing strain on the country’s balance sheet, the IMF said.

“Action is needed to reduce the fiscal deficit, reverse the ongoing increase in public debt, and restore much-needed fiscal buffers to protect the government’s development objectives and its ability respond to shocks,” the institution said.

South Africa is committed to cutting the fiscal deficit and stabilizing debt, and President Cyril Ramaphosa will give more details of the government’s plans to boost growth in his state-of-the-nation speech on June 20, the National Treasury said in an emailed statement.

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