The International Monetary Fund (IMF) has criticised the government's handling of state-owned enterprises (SOEs), and in particular, their responsibility to record interactions that deal with bailouts.
In the IMF released its latest Fiscal Transparency Evaluation Report for South Africa and noted that the country is failing to keep up with international standards and guidance.
At the behest of National Treasury, a team from the IMF was called in to evaluate the department’s fiscal transparency from July 2023.
The IMF conducted several meetings with staff at Treasury and this included Deputy Director Generals Duncan Pieterse and Edgar Sishi.
“South Africa’s 2023 budget reports are not in line with international guidance when reflecting the impact of bailouts as they show it as equity investments,” the report said.
The IMF noted that bailouts to SOEs in SA can provide returns on investment but in some cases, it does not always have this effect.
“Bailouts typically do not result in a return for government in the same manner as other investments and would usually be considered a capital transfer which is a deficit-impacting transaction,” the IMF said.
The organisation also acknowledged that SOEs have been facing financial difficulty over the last decade, requiring several interventions from national government.
The report stressed that it was vital for government to record its interventions accurately when assisting state companies.
“Therefore, it is important to ensure that the economic reality of the interventions is reflected accurately in fiscal reporting by following international guidance,” the report added.
IMF cuts South Africa’s 2024 GDP growth projections
In April, the IMF also projected that SA’s Gross Domestic Product (GDP) growth will be 0.9% for 2024.
The organisation said that in October 2023, SA’s GDP growth was projected to be 1.8% in 2024, then in January the fund said it had decreased to a mere 1%, now it has dropped to less than 1%.
In its latest world economic outlook, the IMF also cut South Africa’s growth outlook for 2025. The organisation has reduced its 2025 growth projections by 0.1 percentage points to 1.2%.
Coupled with slow growth, the IMF said that SA will continue to fight high inflation and high unemployment in 2024.
The organisation said that South Africa’s consumer price inflation (CPI) will average 4.9% for 2024 and noted that this was higher than initial projections of 4.5%.
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