International Monetary Fund, July 6, 2017
Living conditions have ameliorated substantially for the bulk of South Africa’s population since the advent of democracy, but the pace of improvement has gradually slowed. Economic growth is currently insufficient to make a dent in widespread unemployment and longstanding inequalities. Public debate is increasingly questioning whether the prevailing economic policy paradigm can deliver results for all citizens.
Executive Directors considered that the scope for monetary or fiscal policy to provide stimulus is limited. They noted that, with headline inflation projected marginally below the upper threshold of the target band, keeping policy rates on hold is appropriate. Directors highlighted the need for prudent fiscal policy aimed at maintaining debt sustainability while prioritizing pro-growth and pro-poor spending. They encouraged the authorities to strengthen budget execution and the implementation of revenue and fiscal reform measures to ensure that government debt stabilizes significantly below 60 percent of GDP. In particular, they emphasized the need to monitor and manage fiscal risks from explicit or implicit government guarantees, and the importance of reform of state-owned enterprises.
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