IMF Says S. Africa Hasn’t Asked for Assistance, Doesn’t Need It

JOHANNESBURG (Capital Markets in AfricA) – South Africa has not asked the International Monetary Fund for assistance and does not need it, the lender’s resident representative in the country said.

The IMF doesn’t see a balance-of-payments problem in South Africa, which means there’s no need for IMF support, Montfort Mlachila said Thursday at a conference hosted by the Bureau for Economic Research in Johannesburg.

“To tell you the truth we, by we I mean the institution, much prefer the countries to resolve their own problems and I’ve no doubt that South Africa has the capacity to address its own problems in the various areas, especially on the growth front, as well as on the fiscal front,” he said.

The country’s biggest business lobby has warned that approaching the IMF could become necessary unless there is enough political will to address the problems at the cash-strapped state-owned power utility and remove impediments to economic growth. The ruling African National Congress and central bank have quashed speculation that the government may have to ask the IMF for help, with Governor Lesetja Kganyago saying the nation’s finances haven’t deteriorated to that point.

Mlachila said structural reforms can help boost growth, which the BER forecasts at 0.2% for the year. These include the allocation of broadband spectrum, a simplified visa process, increased competition in productive and service markets, more labor-market flexibility and leaner and more efficient state-owned companies.

Broadband allocation and simplifying the visa process are “readily achievable policies” that can boost confidence, Mlachila said.

BER chief economist Hugo Pienaar said at the same conference that South Africa’s ratio of debt to gross domestic product would increase by 5 percentage points if 250 billion rand ($29 billion) of Eskom Holdings SOC Ltd.’s debt was transferred to government’s balance sheet. The power utility can only sustain 150 billion rand of its 440 billion rand debt, company executives told investorslast week.

“The public debt trajectory is not favorable and frankly becoming uncomfortable and the debt-service bill is crowding socially desirable spending,” Mlachila said, repeating an IMF warning from December.

The BER projects a budget deficit of 6% of GDP for the year. That compares with the Treasury’s February forecast of 4.5%, which would already have been the biggest in a decade. The government announced an extra 59 billion rand bailout for Eskom last month.

Source: Bloomberg Business News