Profligate Spending May Lead South Africa to IMF, Kganyago Says

Profligate Spending May Lead South Africa to IMF, Kganyago Says
Lesetja Kganyago, governor of South Africa’s central bank, speaks at an interest rates news conference in Centurion, South Africa, on Thursday, May 30, 2024.

South Africa’s central bank chief said the next government will need to accept it has limited resources or risk having to go to the International Monetary Fund for a bailout.

The African National Congress is weighing options from partnering with the centrist Democratic Alliance to leftist parties to forming a government of national unity, after losing its outright majority in May 29 elections.

Both the Economic Freedom Fighters and former President Jacob Zuma’s uMkhonto weSizwe Party in their manifestos said they want to nationalize mines and banks.

The parties might say that want to nationalize banks, but until that becomes government policy we will not have to respond, Governor Lesetja Kganyago told an event in Johannesburg for the release of the biannual Financial Stability Review on Wednesday.

“If government somehow nationalizes all of these banks, this government will have to borrow a lot of money cause these banks are not particularly cheap at the moment and you are not going to take them for free,” Kganyago said. “Government would easily more than double its debt just to buy the banks.”

The government’s debt to gross domestic product estimated at 74.1% for this fiscal year is already much higher than the emerging market average.

Kganyago said the government will need to consider tradeoffs.

“At the end of the day when you govern, you are going to face the reality that you only have so much resources to work with,” the governor said. “If you try to do things beyond those resources, you are going to end up having to pay for it and it’ll not take long before the funders start saying, I am not funding you anymore.”

When that happens you will be left with only one funder who will come to the party – the IMF, Kganyago said. “They know one thing when they come, they will teach you how to budget and they’ll make you to live within your resources and it’s going to be painful. And you know what? You might not have to drink the medicine. You might have to undergo surgery.”


Comments - Please in order to comment.

Please peer review 3 community comments before your comment can be posted

A South African Hero: You

There’s a 99.7% chance that this isn’t for you. Only 0.3% of our readers have responded to this call for action.

Those 0.3% of our readers are our hidden heroes, who are fuelling our work and impacting the lives of every South African in doing so. They’re the people who contribute to keep Daily Maverick free for all, including you.

The equation is quite simple: the more members we have, the more reporting and investigations we can do, and the greater the impact on the country.

Be part of that 0.3%. Be a Maverick. Be a Maverick Insider.

Support Daily Maverick→
Payment options

MavericKids vol 3

How can a child learn to read if they don't have a book?

81% of South African children aged 10 can't read for meaning. You can help by pre-ordering a copy of MavericKids.

For every copy sold we will donate a copy to Gift of The Givers for children in need of reading support.