South Africa and the IMF
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Statement by IMF First Deputy Managing Director Anne O. Krueger at the Conclusion of a Visit to South Africa
Ms. Anne O. Krueger, First Deputy Managing Director of the International Monetary Fund (IMF), made the following statement today in Johannesburg:
"I was delighted to have had the chance to visit South Africa, especially at such an auspicious time. The country's recent economic achievements are laudable.
"The main purpose of my visit was to participate in the concluding discussions of the IMF's annual Article IV consultations. I had the opportunity to meet with Finance Minister Trevor Manuel and his colleagues yesterday: our talks were constructive and fruitful. And earlier today, I met with Deputy Governors Guma and Plenderleith and their colleagues at the Reserve Bank for equally productive discussions.
"I have also had the chance to meet with some of South Africa's leading academic economists; members of the business community; and representatives from the National Economic Development and Labour Council (NEDLAC). All these meetings have been enlightening for me and valuable for the Fund's assessment of South Africa's economic performance.
"I am grateful to the South African authorities for their hospitality and to everyone I had the chance to meet for our open and amicable discussions.
"South Africa is making impressive progress. Achievement of macroeconomic stability has resulted in higher growth rates and low inflation. As a result the living standards of many South Africans have risen. These achievements are remarkable; all the more so given that this economic progress has been made during a period of unprecedented political and social transformation.
"Recent economic performance has been strong and the short-term outlook remains favorable. For 2005, we expect real GDP to grow by about 4 percent and for inflation to remain comfortably within the target range. We also expect a further rise in employment.
"The progress we have seen is welcome. But important challenges remain. Unemployment is high by any standard, poverty is widespread, and large disparities in income and wealth remain. More rapid growth, sustained over the long term, is the key to meeting these challenges.
"I expressed the Fund's broad support for the government's pro-poor growth strategy, with its emphasis on addressing social needs and improving the conditions for investment and growth-all the while maintaining strong fiscal discipline.
"The successful implementation of monetary policy has strengthened the credibility of the inflation targeting regime: inflation is now widely expected to remain within the target band-an important achievement. The build-up of international reserves has enhanced the ability of the authorities to respond to adverse external shocks. And the authorities' efforts to make it possible for disadvantaged groups to gain access to financial services are starting to bear fruit.
"On the social policy front, the HIV/AIDS program is an important step towards dealing with the epidemic that, one way or another, affects the lives of all South Africans. Progress is also being made with the government's programs for black economic empowerment and land reform. Success in this area should reduce social disparities, foster greater social cohesion, and pave the way for further-and sustainable-social and economic progress.
"More rapid economic growth is vital to achieve the significant reductions in poverty we all want to see. This requires structural reform across the economy. The need for labor market reform is especially pressing: tackling high unemployment is difficult everywhere and South Africa is no exception.
"A review of labor legislation and regulations and their impact on employment, with the aim of increasing job creation, would help raise employment levels and the rate of economic growth.
"So would further trade liberalization. Multilateral liberalization is the most desirable option, and South Africa is playing a pivotal role in the current Doha round of international trade negotiations. The IMF has supported developing country efforts to make progress by calling for the elimination of subsidies and other trade-distorting measures in advanced economies. But unilateral steps by South Africa to liberalize trade, by reducing and simplifying tariffs, would, in the meantime, bring considerable benefits for South Africa itself.
"I want to draw attention to the impressive example South Africa has set by its observance of the IMF's data dissemination standards; and for the country's readiness to complete reviews of all the IMF's standards and codes.
"Progress thus far has been remarkable. I am confident the authorities are determined to build on that progress and undertake the reforms that will raise the sustainable growth rate, reduce poverty and raise the standard of living for all South Africans."
IMF EXTERNAL RELATIONS DEPARTMENT