President Cyril Ramaphosa receiving a courtesy call from Christine Lagarde, International Monetary Fund’s Managing Director who is in the country as part of IMF head Africa trip. 19/12/2018. Picture: KOPANO TLAPE/GCIS
President Cyril Ramaphosa receiving a courtesy call from Christine Lagarde, International Monetary Fund’s Managing Director who is in the country as part of IMF head Africa trip. 19/12/2018. Picture: KOPANO TLAPE/GCIS

SA should “never be complacent” about protecting key institutions such as the central bank or National Treasury as it tries to boost economic growth, says IMF MD Christine Lagarde.

“A sound monetary policy that walks on its two legs is precious and needs to be secured; a good, solid Treasury that can’t be compromised is a precious institution that needs to be secured and protected,” Lagarde told reporters on Wednesday in Pretoria. “I’m very hopeful that the strength of an institution like the central bank or the strengthening of the Treasury are issues that are high on the agenda and that there is never complacency about it.”

The rise of populism in developed economies has brought with it a wave of attacks on central banks in the US, UK, Europe and SA, where governor Lesetja Kganyago successfully fought off a proposal by the public protector to change the constitution to remove the Reserve Bank’s inflation-target mandate.

State capture

Lagarde said she had held “excellent talks” with President Cyril Ramaphosa, who is contending with GDP that hasn’t expanded at more than 2% annually since 2013 and emerged from a recession in the third quarter. He has also made the fight against crime and corruption that has battered government-owned companies a top priority. A judicial inquiry, headed by judge Raymond Zondo, is investigating state capture.

“There is a lot of work to be done,” Lagarde said. “It is certainly the president’s endeavour to get to the bottom of it and to support this project of removing this state capture. I’m sure that there will be a lot of good coming out of it even though the process is painful, but for the population of South Africa it is very much needed.”

Lagarde’s time in SA follows an IMF staff visit, which found that public debt is reaching “uncomfortable levels”. The lender said SA should introduce a debt anchor in its budget to signal the government’s commitment to reduce its obligations and help tighten fiscal policy.

Lagarde doesn’t see the need for IMF assistance for SA, she said in a separate interview with SABC News.

Growth drivers

The October mid-term budget showed government debt will peak two years later, and higher, than previously forecast, the fiscal gap will widen further and state revenue will continue to undershoot. The country must rein in its spiralling credit costs to prevent debt exceeding 60% of GDP, which may force it to seek IMF assistance, finance minister Tito Mboweni said after the budget presentation.

The private sector has to drive investment, which will raise growth and create jobs, Lagarde said.

“There are no magic recipes: predictability, fiscal discipline, debt sustainability, a policy mix that will actually give to the investors an environment that will be conducive to their business is generally expected on their part,” she said.

Bloomberg