Fiscal prudence makes SA more resilient Lesetja Kganyago. Picture: Gallo Images/Ziyaad Douglas

South Africa’s recent success in rebuilding fiscal buffers that were eroded by mismanagement means the country is better positioned to navigate a deteriorating global economic outlook, Reserve Bank Governor Lesetja Kganyago said.

The International Monetary Fund this week cut its forecast for global growth next year, warning that about a third of the world’s economy risks contracting as efforts to cool the hottest inflation in decades may add to the damage wrought by the war in Ukraine and China’s slowdown.

“If this indeed becomes a crisis, South Africa will go into this crisis with better policy buffers than when we were going into the Covid-19 pandemic,” Kganyago said in an interview on the sidelines of the annual meetings of the IMF and World Bank in Washington.

Public finances rapidly deteriorated during former President Jacob Zuma’s almost nine-year rule, when graft became endemic and public procurement budgets were looted. Loss-making state companies, including Eskom, received a series of bailouts and the government repeatedly failed to contain its wage bill.

While the National Treasury has suffered the loss of key personnel, its resolve to stabilise public finances is starting to show progress under President Cyril Ramaphosa’s administration.– Bloomberg

The shortfall in the primary budget, South Africa’s most critical fiscal anchor, narrowed more than expected in the year through March 2022, and the ratio of government debt to gross domestic product also beat the National Treasury’s estimates, central bank data show.

The Treasury is due to present a budget update on 26 October.

“Factually, since 2020, the Treasury has outperformed on their fiscal outcomes,” Kganyago said.

“The smart money can’t miss this,” the governor said, adding that he told investors in New York earlier this week that South Africa is “a different country” to the one that they were looking at before.

The nation’s more resilient and improving fiscal position, with low levels of foreign-currency denominated debt and a relatively strong current account balance, is supported by its deep and liquid financial markets and the central bank’s firm approach to containing price growth, he said.

Reforms aimed at tackling the country’s electricity-supply constraints should also help, Kganyago said. – Bloomberg


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