Fiscal prudence has made South Africa more resilient, says Kganyago

(Bloomberg) – South Africa’s recent success in rebuilding fiscal buffers eroded by mismanagement means the country is better placed to weather a deteriorating global economic outlook, the Bank’s governor said. reserve, Lesetja Kganyago.

The International Monetary Fund this week lowered its global growth forecast for next year, warning that about a third of the global economy is at risk of contracting as efforts to quell the highest inflation since decades could add to the damage caused by the war in Ukraine and the slowdown in China.

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

Public finances deteriorated rapidly during former President Jacob Zuma’s nearly nine-year rule, when corruption became rampant and public procurement budgets were looted. Loss-making state-owned companies, including Eskom Holdings SOC Ltd., have received a series of bailouts and the government has repeatedly failed to contain its wage bill.

While the National Treasury has suffered the loss of key personnel, its drive to stabilize public finances is beginning to show progress under the administration of President Cyril Ramaphosa.

The primary budget deficit, South Africa’s most critical fiscal anchor, has narrowed more than expected in the year to March 2022, and the public debt-to-gross domestic product ratio also exceeded national treasury estimates, according to central bank data. The Treasury is due to present a budget update on October 26.

“In fact, since 2020, the Treasury has outperformed on its budget results,” Kganyago said. ‘Smart money can’t miss this,’ the governor said, adding that he told investors in New York earlier this week that South Africa was ‘a different country’ than they were considering. previously.

The country’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 to address the country’s electricity supply constraints should also help, Kganyago said.

©2022 Bloomberg LP

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