South Africa should “never be complacent” about protecting key institutions such as the central bank or National Treasury as it tries to boost economic growth, International Monetary Fund Managing Director Christine Lagarde said.
The rise of populism in developed economies has brought with it a wave of attacks on central banks in the US, UK, Europe and South Africa, where Governor Lesetja Kganyago successfully fought off a proposal by the nation’s anti-graft ombudsman to change the constitution to remove the Reserve Bank’s inflation-target mandate.
“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 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.”
Lagarde said she held “excellent talks” with President Cyril Ramaphosa, who is contending with gross domestic product that hasn’t expanded at more than 2% annually since 2013.
“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.”
Her time in South Africa follows an IMF staff visit, which found that public debt is reaching “uncomfortable levels.” The lender said South Africa should introduce a debt anchor in its budget to signal government’s commitment to reduce its obligations and help tighten fiscal policy.
The October mini 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 spiraling credit costs to prevent debt exceeding 60% of gross domestic, 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 she wants to make it "crystal clear" that she is not in SA to discuss or negotiate any IMF financial support for the country.
"I hope that puts this rumour to bed."
In answer to a question she also emphasised that the IMF will certainly not extend a loan to embattled state power utility Eskom if asked to do so by the state-owned enterprise.
"We only deal with members and no private company is a member of the IMF," she explained.