Macroeconomics: South Africa’s Fiscal Space Reforms

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Table of Contents

Introduction
Discussion
Concluding Points
References

Introduction

The selected article from Bloomberg Businessweek was written by Naidoo (2020), and it is called “IMF Says S. Africa Has no Fiscal Space, Must Push Reforms”. It was chosen for discussion because it stresses the difficulties currently faced by South Africa. It may be assumed that the text belongs to macroeconomics since it reveals the patterns of economic development in this territory (Lipschitz & Schadler, 2019). The object of the study is such aspects as the general level of national income, employment, prices, and foreign economic activity of South Africa (Lipschitz & Schadler, 2019). The purpose of this paper is to review the article and express the author’s opinion on the subject matter.

Discussion

According to Naidoo (2020), the region has no fiscal space left, and drastic measures are needed to ensure the debt is sustainable. The author states that “high deficits have not materially boosted economic growth as intended; instead they drastically lifted the debt-to-GDP ratio” (Naidoo, 2020, para.3). This implies that the authorities need to ensure the budget is being consolidated and that adequate fiscal policy is in place. These measures will allow for establishing a low primary balance.

The author of this paper believes that the main problem is the lack of state regulation of tax policy. Despite allegations that the principles of countercyclical policy, acceptable debt levels, and intergenerational justice continue to determine fiscal policy in South Africa, in practice, the fiscal space has not been rebuilt (Lipschitz & Schadler, 2019). The budget of South Africa should implement the government’s commitments to reduce the budget deficit and stabilize debt (Naidoo, 2020). Despite the introduction of the spending limit, weak economic growth ensured a constantly large budget deficit.

Concluding Points

Thus, it can be concluded that the selected article on the macroeconomic situation in South Africa showed the complexity of the setting in this region. Fiscal reforms should include lowering spending limits, increasing income tax rates, and tightening control over budget preparation and spending. The main international challenges include the need to support African countries in the development and implementation of appropriate and sustainable fiscal and budgetary policies.

References

Lipschitz, L., & Schadler, S. (2019). Macroeconomics for professionals. New York, NY: Cambridge University Press.

Naidoo, N. (2020). IMF says S. Africa has no fiscal space, must push reforms.Bloomberg. Web.

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Macroeconomics: South Africa’s Fiscal Space Reforms

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