Challenging global economic fiscal conditions and South Africa's growing needs and development priorities require the government to address structural issues to better manage its fiscal situation and ensure the country is on a sustainable growth and debt trajectory. need to be addressed.
This was an important message delivered by the First Deputy Secretary of the International Monetary Fund (IMF). Gita Gopinathin a lecture at the School of Economics and Finance at the University of the Witwatersrand on August 31st.
Gopinath pointed out that the IMF is providing loans to offset tight funding conditions and helping governments improve their fiscal position with better planning. We also provide income and expense advice and technical assistance.
Gopinath said the IMF's forecasts show South Africa's growth rate is near zero this year, with minimal growth over the medium term, and that the IMF has two key priorities to improve South Africa's growth trajectory. He claimed to have proposed a field.
Its first recommendation concerns finances.
Gopinath said the IMF forecast that interest as a share of South Africa's revenue would increase from about 17% this year to 27% by 2028, and therefore recommended strengthening the country's fiscal consolidation. Stated.
He noted that the South African government had managed to overcome the pandemic and reduce the budget deficit at a time when the economy was recovering strongly.
However, Gopinath stressed that the country needs further fiscal consolidation as it looks to the future, with IMF projections showing a budget deficit of around 6%.
With so much money currently being used to support state-owned enterprises, one way to do this is to prioritize which state-owned enterprises (SOEs) need funding. The country also had to revise its wage bill.
Gopinath noted that incomes are also falling as growth slows and commodity prices are not expected to reach the high levels experienced at the peak of the energy crisis caused by the Russia-Ukraine situation.
He therefore stressed the importance of resolving the country's energy crisis as it affects the growth of gross domestic product.
Second, Gopinath said the country needs to undertake structural reforms and address structural problems.
He noted that state-owned enterprises such as Eskom and Transnet are important and therefore it is essential to improve the operational performance and financial viability of these enterprises, both of which require significant efforts. did.
Gopinath also argued that there is a need to reconsider the government's role and support in other state-owned enterprises, taking into account the possibility of increased private sector participation in things like power generation.
He emphasized that the IMF recognizes the importance of the private sector playing a greater role in many state-owned enterprises. He considered the presence of state-owned enterprises in the country too large.