There is no debating that South Africa's fiscal finances are in a dire state. But it is still too early for the ignominious calls for external debt relief from the IMF. Significant time has been wasted, trust eroded and economic damage caused in the past decade, but there remains a brief window of opportunity
The justifiable expansion in government spending that immediately followed the 2007/08 global financial crisis has been supplanted by a decade of loose fiscal policy and sub-par macroeconomic growth. Before accounting for the inevitable realisation of Eskom's contingent liabilities to the fiscus, South Africa's "lost decade" has resulted in the doubling of government debt - from 26% in the 2008/09 fiscal year to 57% (and counting) at present.
Against a backdrop of weak government finances, sickly economic growth and seemingly absent political will to effect growth-enhancing policy reform - there's growing disquiet about the prospect of South Africa approaching the International Monetary Fund (IMF) for bailout financing.
Two key questions need to be answered to determine whether these fears are well-founded:
Does South Africa fail a debt sustainability assessment?
Is South Africa's capital market access at imminent risk?
Firstly, central to determining South Africa's debt sustainability over...