The International Monetary Fund has criticised government’s lack of progress in the implementation of structural reforms, and continued weaknesses in state-owned enterprises (SOEs), identifying key risks and proposed policy recommendations.
This after virtual consultations with South Africa from November 17 to December 7 as part of its surveillance function.
“The staff recommended that structural rigidities be tackled immediately to increase the economy’s productivity and competitiveness and reduce poverty and equality,” the National Treasury said.
“Additionally, the IMF argues that growth-friendly fiscal consolidation needs to focus on reversing the expansion on current expenditure while broadening the tax base.”
It said there was 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.
In general, the IMF’s concerns were aligned with government’s response programme to stimulate economic growth, and were guided by South Africa’s Economic Reconstruction and Recovery Plan, the Treasury said.
The objective of consultations is to conduct economic and financial assessments of government policies and provide policy recommendations.
On Wednesday, the IMF published its “Staff Concluding Statement”, outlining its preliminary findings after meetings with the South African government, the South African Reserve Bank, Eskom, business, organised labour and academia. The outcome of their consultation will be summarised in an Article IV Report, which is expected to be considered by the IMF Executive Board in February next year.
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 had been tax collections, which had exceeded expectations in the short term. However, the recent spike in commodity prices was considered temporary.
“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 added. – SAnews.gov.za
