{
  "title": "IMF Executive Board Concludes Post Financing Assessment Discussions with South Africa",
  "publication": "IMF News, September 4, 2024",
  "sourceUrl": "https://www.imf.org/en/news/articles/2024/09/04/pr24317-south-africa-imf-exec-board-concludes-post-fin-assess-discuss",
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  "summary": "Washington, DC – September 4, 2024: The Executive Board of the International Monetary Fund (IMF) concluded the Post Financing Assessment (PFA) , and endorsed the Staff Appraisal on a lapse-of-time basis. South Africa’s capacity to repay the Fund is assessed as adequate.",
  "publishDate": "2024-09-04",
  "sections": [
    {
      "heading": "Summary of assessment and context",
      "content": "- The Executive Board concluded the Post Financing Assessment (PFA) and endorsed the Staff Appraisal on a lapse-of-time basis.\n- South Africa’s capacity to repay the Fund is assessed as adequate.\n- The new government of national unity (took office in June) faces challenges including declining real per capita growth, high unemployment, poverty, inequality, and rising public debt.\n- The new administration has committed to continue structural reforms to address supply constraints and bolster inclusive growth while maintaining fiscal discipline."
    },
    {
      "heading": "Recent macroeconomic performance (selected points)",
      "content": "- Growth slowed to 0.7 percent in 2023, depressed in part by widespread power shortages and disruptions at rails and ports.\n- Unemployment reached 32 percent at end-2023.\n- Inflation fell within the SARB’s 3–6 percent target range in 2023 and moderated to 5.1 percent in June 2024.\n- Current account deficit widened to 1.6 percent of GDP in 2023 (from 0.5 percent in 2022), driven by higher imports.\n- Budget deficit remained in line with the revised budget target; public debt rose to just above 74 percent of GDP."
    },
    {
      "heading": "Outlook and projections",
      "content": "- Growth is expected to reach 1 percent in 2024, stabilizing at 1.4 percent in the medium term as structural bottlenecks ease only gradually.\n- Inflation is projected to decline toward the midpoint of the target range 2025Q2.\n- Current account deficit expected to increase modestly to 2.2 percent of GDP by 2029 as imports accelerate with domestic demand.\n- Fiscal deficit projected to remain elevated over the medium term due to rising debt service, support to state-owned enterprises, and sizeable spending on public wages and transfers; public debt is not expected to stabilize under the baseline.\n- Risks: broadly balanced. Upside—faster reform implementation under the new government. Downside—uncertain external environment and inability to agree on needed fiscal and structural reforms."
    },
    {
      "heading": "Executive Board assessment — structural and policy priorities",
      "content": "- Structural reforms are paramount to support job creation, growth, and prosperity:\n  - Wide-ranging electricity and transportation-sector reforms, including to foster private sector participation, are indispensable to reinvigorating activity, boosting exports, and supporting the green transition.\n  - Product-market reforms to improve the business environment and remove obstacles to trade, complemented by labor-market reforms, are essential to boost investment and employment.\n  - Strengthening governance and reducing corruption are essential to reap reform gains that should be broadly distributed.\n- Fiscal policy:\n  - An ambitious expenditure-based consolidation of at least 3 percent of GDP over the next three years is required to place debt on a sustained downward path while protecting vulnerable groups.\n  - Reliance on gains on foreign reserves has helped lower borrowing needs but does not substitute for the needed fiscal consolidation.\n  - Any additional spending initiatives to lower inequality and improve health should be financed in a deficit-neutral way.\n  - Improve institutional fiscal framework by adopting a debt rule, bolstering the procurement framework, and improving public-investment management to support adjustment and mitigate fiscal risks.\n- Monetary policy:\n  - Should carefully manage the descent of inflation to the mid-point of the target range and stay data dependent.\n  - Rate cuts should be considered only once inflation declines sustainably towards the mid-point of the target range.\n  - Any change to the monetary policy framework should be carefully timed, well-coordinated and communicated to manage expectations and safeguard credibility.\n- Financial sector policy:\n  - Continue to support financial stability through ongoing banking resolution and safety-net reforms and the new loss-absorbing capacity requirement.\n  - Continued monitoring of risks is critical given the sovereign–financial sector nexus.\n  - Implementation of prudential regulations, along with the countercyclical buffer, could play a vital role."
    },
    {
      "heading": "Capacity to repay and scenario assessment",
      "content": "- Staff assess capacity to repay the Fund as adequate under the baseline and downside scenarios.\n- South Africa is expected to be able to repay the Fund by end-2025 given ample reserves and manageable external debt service.\n- Under a downside scenario, capacity to repay is also assessed as adequate, but policies will need to be tightened to contain inflationary pressures and safeguard debt sustainability while protecting vulnerable groups.\n- The flexible exchange rate is expected to act as a shock-absorber."
    },
    {
      "heading": "Key statistics (selected figures from South Africa: Selected Economic Indicators, 2022–26)",
      "content": "- Social and population:\n  - Nominal GDP (2022, billions of US dollars): 407\n  - GDP per capita (2022, in US dollars): 6,712\n  - Population total (2022, million): 62\n  - Urban population (2020, percent of total): 67\n  - Life expectancy at birth (2020, number of years): 64\n  - Lower national poverty line (2015, percent of population): 40\n  - Undernourishment (2019, percent): 7\n  - Highest 10 percent of population (2015, income share): 53\n  - Gini coefficient (2015): 65\n- National income and prices (annual percentage change):\n  - Real GDP: 2022: 1.9; 2023: 0.7; 2024: 1.0; 2025: 1.3; 2026: 1.4\n  - Domestic demand: 2022: 3.9; 2023: 0.8; 2024: 1.2; 2025: 1.5\n  - GDP deflator: 2022: 5.0; 2023: 4.9; 2024: 4.5\n  - CPI (annual average): 2022: 6.9; 2023: 5.9; 2024: 5.2; 2025: 4.6\n  - CPI (end of period): 2022: 7.4; 2023: 5.5\n- Labor market:\n  - Unemployment rate (percent of labor force, annual average): 2022: 33.5; 2023: 33.1; 2024: 33.8; 2025: 34.2; 2026: 34.5\n- Savings and investment (percent of GDP):\n  - Gross national saving: 2022: 14.4; 2023: 15.0; 2024: 13.9; 2025: 13.7\n  - Investment (including inventories) 2/: 2022: 12.4; 2023: 15.4; 2024: 15.5; 2025: 15.7; 2026: 15.8\n- Fiscal position (percent of GDP):\n  - Revenue, including grants 4/: 2022: 25.0; 2023: 27.6; 2024: 26.8; 2025: 27.0; 2026: 27.1\n  - Expenditure and net lending 5/: 2022: 34.6; 2023: 31.9; 2024: 32.7; 2025: 33.2; 2026: 33.4\n  - Overall balance: 2022: -9.6; 2023: -4.3; 2024: -5.9; 2025: -6.3; 2026: -6.4; (alternate entry) -5.5\n  - Primary balance: 2022: -5.4; 2023: 0.3; 2024: -0.9; 2025: 0.2\n  - Gross government debt 6/: 2022: 69.0; 2023: 70.8; 2024: 73.4; 2025: 75.0; 2026: 77.6; (alternate entry) 79.3\n  - Government bond yield (10-year and over, percent) 7/: 2022: 9.7; 2023: 11.3; 2024: 11.6\n- Money and credit:\n  - Broad money: 2022: 9.4; 2023: 8.3; 2024: 6.5; 2025: 7.5\n  - Credit to the private sector 8/: 2022: 8.9; 2023: 4.4\n  - Repo rate (percent, end-period) 7/: 2022: 3.5; 2023: 7.0; 2024: 8.25\n- Balance of payments:\n  - Current account balance (billions of U.S. dollars): 2022: 6.7; 2023: -1.8; 2024: -6.1; 2025: -6.9; 2026: -7.7; (alternate) -8.6\n  - Current account percent of GDP: 2022: 2.0; 2023: -0.5; 2024: -1.6; 2025: -1.9; 2026: -2.0\n  - Exports growth (volume): 2022: -11.9; 2023: 3.6; 2024: 3.7\n  - Imports growth (volume): 2022: -17.4; 2023: 14.9; 2024: 4.1; 2025: 4.0; 2026: 3.8\n  - Terms of trade: 2022: 9.3; 2023: -4.8; 2024: -1.2; 2025: -1.4\n  - Overall balance (percent of GDP): 2022: -1.0; 2023: 0.5\n  - Gross reserves (billions of U.S. dollars): 2022: 55.5; 2023: 60.6; 2024: 62.5\n  - Gross reserves (in percent of ARA): 2022: 78.1; 2023: 88.9; 2024: 97.0; 2025: 95.3\n  - Total external debt (percent of GDP): 2022: 50.5; 2023: 40.4; 2024: 41.5; 2025: 42.2; 2026: 43.6; (alternate) 44.9\n  - Nominal effective exchange rate (period average) 7/: 2022: -11.6; 2023: -4.9\n  - Real effective exchange rate (period average) 7/: 2022: -10.1; 2023: -9.0\n  - Exchange rate (Rand/U.S. dollar, end-period) 7/: 2022: 14.7; 2023: 17.0; 2024: 18.4\n\nInternational Monetary Fund — Press Release No. 24/317, September 4, 2024.\n\n---\n\n\n References\n\n- https://www.imf.org/-/media/images/imf/bios/imfboard.jpg\n- The Executive Board\n- South Africa and the IMF\n- Press Releases\n- PRESS CENTER\n- [[1]](https://www.imf.org/?scitemid=%7BE71FCB43-CC53-4298-95F7-45622888FF76%7D&sclang=en&scmode=preview&scsite=imf)\n- IMF lending program\n- here\n- https://www.imf.org/en/home\n\nSource: https://www.imf.org/en/news/articles/2024/09/04/pr24317-south-africa-imf-exec-board-concludes-post-fin-assess-discuss"
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    "Published: September 4, 2024",
    "The Executive Board concluded the Post Financing Assessment (PFA) and endorsed the Staff Appraisal on a lapse-of-time basis.",
    "South Africa’s capacity to repay the Fund is assessed as adequate.",
    "The new government of national unity (took office in June) faces challenges including declining real per capita growth, high unemployment, poverty, inequality, and rising public debt.",
    "The new administration has committed to continue structural reforms to address supply constraints and bolster inclusive growth while maintaining fiscal discipline.",
    "Growth slowed to 0.7 percent in 2023, depressed in part by widespread power shortages and disruptions at rails and ports.",
    "Unemployment reached 32 percent at end-2023.",
    "Inflation fell within the SARB’s 3–6 percent target range in 2023 and moderated to 5.1 percent in June 2024.",
    "Current account deficit widened to 1.6 percent of GDP in 2023 (from 0.5 percent in 2022), driven by higher imports.",
    "Budget deficit remained in line with the revised budget target; public debt rose to just above 74 percent of GDP.",
    "Growth is expected to reach 1 percent in 2024, stabilizing at 1.4 percent in the medium term as structural bottlenecks ease only gradually.",
    "Inflation is projected to decline toward the midpoint of the target range 2025Q2.",
    "Current account deficit expected to increase modestly to 2.2 percent of GDP by 2029 as imports accelerate with domestic demand.",
    "Fiscal deficit projected to remain elevated over the medium term due to rising debt service, support to state-owned enterprises, and sizeable spending on public wages and transfers; public debt is not expected to stabilize under the baseline.",
    "Risks: broadly balanced. Upside—faster reform implementation under the new government. Downside—uncertain external environment and inability to agree on needed fiscal and structural reforms.",
    "Structural reforms are paramount to support job creation, growth, and prosperity:",
    "Fiscal policy:",
    "Monetary policy:",
    "Financial sector policy:",
    "Staff assess capacity to repay the Fund as adequate under the baseline and downside scenarios.",
    "South Africa is expected to be able to repay the Fund by end-2025 given ample reserves and manageable external debt service.",
    "Under a downside scenario, capacity to repay is also assessed as adequate, but policies will need to be tightened to contain inflationary pressures and safeguard debt sustainability while protecting vulnerable groups.",
    "The flexible exchange rate is expected to act as a shock-absorber.",
    "Social and population:",
    "National income and prices (annual percentage change):",
    "Labor market:",
    "Savings and investment (percent of GDP):",
    "Fiscal position (percent of GDP):",
    "Money and credit:",
    "Balance of payments:",
    "[https://www.imf.org/-/media/images/imf/bios/imfboard.jpg](https://www.imf.org/-/media/images/imf/bios/imfboard.jpg)",
    "[The Executive Board](https://www.imf.org/external/np/sec/memdir/eds.aspx)",
    "[South Africa and the IMF](http://www.imf.org/external/country/ZAF/index.htm)",
    "[Press Releases](https://www.imf.org/en/news/searchnews)",
    "[PRESS CENTER](http://presscenter.imf.org/)",
    "[[1]](https://www.imf.org/?sc_itemid=%7BE71FCB43-CC53-4298-95F7-45622888FF76%7D&sc_lang=en&sc_mode=preview&sc_site=imf)",
    "[IMF lending program](https://www.imf.org/en/About/Factsheets/IMF-Lending)",
    "[here](https://www.imf.org/en/About/Factsheets/Sheets/2023/Post-Financing-Assessment-PFA)",
    "[https://www.imf.org/en/home](https://www.imf.org/en/home)"
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