The National Treasury says the International Monetary Fund’s (IMF) concerns over the South African economy are aligned with government’s response programme to stimulate growth, which is guided by South Africa’s Economic Reconstruction and Recovery Plan.
The IMF held virtual consultations with South Africa from 17 November to 7 December as part of its surveillance function.
In a statement on Wednesday, Treasury said the objective of consultations was to conduct economic and financial assessments of government policies and provide policy recommendations.
On Wednesday, the IMF published its “Staff Concluding Statement”, outlining its staff’s preliminary findings.
IMF staff held meetings with the South African government, the South African Reserve Bank, Eskom, business, organised labour and academia. The outcome of their consultation would be summarised in an Article IV Report, which was expected to be considered by the IMF Executive Board in February 2022.
IMF findings
Treasury said the IMF staff’s preliminary findings pointed to a lack of progress in the implementation of structural reforms and continued weaknesses in state-owned enterprises (SOEs). It identified key risks and proposed policy recommendations.
“The staff recommended that structural rigidities be tackled immediately to increase the economy’s productivity and competitiveness and reduce poverty and equality.
“Additionally, the IMF argues that growth-friendly fiscal consolidation needs to focus on reversing the expansion on current expenditure while broadening the tax base.
The IMF notes that there is an urgent need to condition any support to SOEs on the implementation of concrete and measurable actions that would significantly improve their performance and restore their viability,” said the Treasury.
In general, the IMF’s concerns were aligned with government’s response programme to stimulate economic growth, and was guided by South Africa’s Economic Reconstruction and Recovery Plan.
Outlook on growth
The Treasury said Gross Domestic Product (GDP) growth was expected to recover to 5.1% in 2021 and average 1.7% over the next three years.
It said positive developments on the fiscal side have been tax collections that exceeded expectations in the short term. However, the recent spike in commodity prices was considered temporary.
Fiscal policy considerations
“In the 2021 Medium-Term Budget Policy Statement (MTBPS), the government underscored its commitment to fiscal sustainability, enabling long-term growth through narrowing the budget deficit and stabilising debt.
“Furthermore, to improve transparency, reports from organs of state on COVID-19 related expenditure are published regularly on the National Treasury’s public website,” it said. – SAnews.gov.za
