South Africa has both a rapidly rising sovereign debt and near-zero GDP growth compounded by the limited fiscal space to deal with both.

Globally, despite considerable easing in global inflation over the past year, the stickiness in core inflation has slowed the path to the 2% to 3% inflation targets that many central banks are trying to achieve. Global interest rates remain high, with many emerging economies continuing to experience currency volatility and, often, higher-than-desired inflation.

Some economies, especially in Latin America, which moved faster to tame the post-pandemic inflation surge, have been able to cut rates significantly more than other economies. Here at home, headline inflation has fluctuated between 5% and 6% over the past six months and is forecast to moderate over the course of 2024, averaging 5.1% for the year as food and fuel price inflation ease. Its return to the midpoint of the target band is only expected in the last quarter of 2025.

The Reserve Bank notes that South Africa's GDP growth remains low, mainly due to inadequate energy supply, sharply deteriorated logistics capacity as well as low confidence among businesses and households. GDP growth slumped to 0.6% in 2023, down from 1.9% in 2022 and 4.7% in 2021. The near- and medium-term outlook is for growth to increase, albeit slowly, as electricity supply improves gradually, underpinned by...