As junk status looms, IMF says SA badly needs a credible fiscal consolidation plan
‘If nothing is done between now and the budget presentation in February, then things will become a lot more difficult on the fiscal front’
SA will face more fiscal difficulties and higher financing costs should state-owned companies’ debt continue rising and if the nation’s local debt is downgraded to junk, the International Monetary Fund says. If state entities such as cash-strapped power utility Eskom and South African Airways request more state support, the government will have to step in to help, removing fiscal space for "more socially useful activities", says Montfort Mlachila, the lender’s senior resident representative in the country. "If the current fiscal problems are not addressed soon enough, it will obviously worsen the market sentiment and could increase the financing costs," he says. "If nothing is done between now and the budget presentation in February, then things will become a lot more difficult on the fiscal front." Last month, Treasury almost halved its economic growth forecast for this year, to 0.7%, and said debt was predicted to rise. The deteriorating trajectory threatens to trigger a downgrade...
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