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

(file photo).

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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