IMF says S. Africa's economic reforms facing constraints

Source: Xinhua| 2018-11-21 01:14:11|Editor: yan
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JOHANNESBURG, Nov. 20 (Xinhua) -- South Africa's new economic reforms are facing serious hurdles due to stagnant economic growth and state-owned companies' poor finances, the International Monetary Fund (IMF) has warned.

In an assessment report released late on Monday, the IMF noted that the optimism experienced after President Cyril Ramaphosa's election has "dissipated as growth remain stuck in low gear."

In October, the IMF revised the country's economic growth forecast down to 0.8 percent, from a previous forecast of 1.5 percent, for 2018.

With the finances of state-owned companies such as power utility Eskom and airline SAA remaining in the doldrums, more work should be done to improve their conditions, the IMF said.

"Economic reforms in a number of areas, in particular strengthening the finances of state-owned enterprises, reducing costs of doing business and increasing competition are proceeding, albeit slowly," the report said.

The IMF warned that the consequences of poor economic growth might be disastrous.

"Weak growth and deteriorating public finances could trigger additional capital outflows, potentially creating adverse spillovers through the interconnected financial systems," the report said.

Responding to the IMF report, Lumkile Mondi, a senior lecture at the Wits university school of economics, told Xinhua on Tuesday that the government is aware of what should be done.

"Some of the government companies should be sold, privatized and restructured. Cyril Ramaphosa has been rebuilding some of the institutions, but it will take another 25 years to get things right," Mondi said. "Economic reforms should be implemented."

Dawie Roodt, a senior economist at Efficient group, said reforms should be implemented at state-owned enterprises.

The IMF said public debt is set to rise as a result of public-sector wage bill and state-owned enterprises' requiring bailouts.

"There must be a restructuring at state-owned entities. The state needs to be reduced in size," he said.

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