South Africa: No IMF Bailout in the Near Future, Say (Some) Analysts

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Is South Africa about to go on bended knee to the IMF, triggering years of austerity and populist politics? There seems to be a growing consensus that it is, but there are dissenting voices out there. They note that South Africa is not on the verge of a balance of payments crisis and that its debt levels are underpinned by long-term issuance and deep liquidity. That doesn't mean policymakers should be complacent.

The International Monetary Fund (IMF) recently had the following to say about a struggling economy: "Structural weaknesses remained largely unaddressed, including a chronically weak tax administration, a difficult business environment, inefficient and loss-making SOEs, amid a large informal economy. Without urgent policy action, economic and financial stability could be at risk, and growth prospects will be insufficient to meet the needs of a rapidly growing population."

It sounds like the fund is talking about South Africa, where urgent policy action is needed to address structural challenges that remain "largely unaddressed." It might be a stretch to describe the South African Revenue Service (SARS) as "chronically weak," though admittedly it lost a lot of its administrative capacity during the Zuma years. But the business environment is certainly difficult, state-owned...

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