Enhancing sustainable fiscal policy in south africa. Interest rates are insulated from fiscal policy under two alternative conditions. The country fixed effects are countrys legal origin and countrys latitude. Finally, section 5 concludes with key policy implications. Fiscal panorama of latin america and the caribbean 2018 cepal. South africas use of fiscal policy and social spending as.
South african economy consistent with long run growth, employment creation and an equitable distribution of income. South africas fiscal policy is progressive, but is it enough. Monetary policy and the challenge of economic growth. By taxing the income of the rich proportionally more than the poor and using social spending to boost the incomes of the poorest more than 10fold, fiscal policy narrows the income gap between the rich and poor. A coordinated monetary and fiscal policy would see the bubbles clustered together a lot more. Paul dunney november 2015 abstract the debate on global current account imbalances continues to develop, with growing interest in the macroeconomic instability and widening current account decits faced by emerging markets.
Can the effect be mitigated by public policy interventions aimed at improving the investment climate. This sixth edition of the south africa economic update focuses on the role of fiscal policy in addressing the twin challenges of poverty and inequality in south africa. Apr 12, 2015 south africas fiscal policy goes a long way towards achieving income redistribution but poverty and inequality in south africa after taxes and spending remains too high. The last census was held in 2011, with a more recent intercensal national survey conducted in 2016. Fiscal consolidation, fiscal policy transmission, and current. Section 4 examines progress in fiscal decentralization, overall fiscal performance and services delivery in south africa.
Fiscal policy and economic growth in south africa matthew kofi ocran 1 1 department of economics, university of fort h are, alice main c ampus, private mail bag, x 14. Olusegun ayodele akanbi corresponding author associate professor economics university of south africa. Price stability reduces uncertainty in the economy and, therefore, provides a favourable environment for growth and employment creation. Pdf geography, demography, and economic growth in africa. Despite the large fiscal redistribution, however, south africa remains one of the most unequal countries in the world. Fiscal policy in south africa is now growth orientated. In south africa the main fiscal challenge, therefore, is to find ways through which the recent gains in fiscal solvency are not at the expense of the future revenue base. Government expenditure and income tax rate are fiscal policy tools. Chinas engagement in africas infrastructure development has gained momentum along with its belt and road initiative bri. For instance, south africa is a large electricity producer but onethird of its population still does not have access to electricity. The section also presents and discusses econometric findings on the effect of fiscal decentralization on service delivery in south africa. Analysing the effects of fiscal policy shocks in the south african economy. Public debt and postcrisis fiscal policy in south africa. Fiscal policy in brief fiscal policy is focused on containing the budget deficit and slowing the pace of debt accumulation to maintain spending programmes and promote confidence in the economy.
The results of this study are discussed and their implications for fiscal consolidation in south africa explained. Tanzanian infrastructure development and the role of china. Fiscal policy in an increasingly stable south african economy. The south african reserve bank sarb and the national treasury nt, the respective custodians of monetary and fiscal policy, are naturally faced with the same set of macroeconomic conditions at any particular point in time. The theme of the fourth biennial policy conference of the south african reserve bank the bank held in 2012 was monetary policy and the challenge of economic growth. South africas development objectives, expressed in the national development plan, rely on achieving higher economic growth and using public resources effectively. In 1961 south africa became an independent republic, but to its great discredit, the government continued its official policy of racial segregation. Fiscal policy responsiveness, persistence and discretion european. Genetic variability of south african fiscal shrikes lanius collaris across an altitudinal gradient article pdf available in african zoology 402. Fiscal policy, commodity super cycle, business cycles. Microeconomic policies are formulated in terms of the national industrial policy action plans 2010, 2014 and the south african trade policy and strategy framework 2010. South africa is a country with a dual socioeconomic composition a large industrial base with a good infra structure the best in africa, but with a large third world component.
The 2017 budget tax proposals will raise r28 billion in additional revenue in 201718. Increased investment spending would decrease the national debt of the country as a percentage of its gross domestic product, reduce government deficit and improve the economic health of the country, says margaret chitigamabugu. South africas monetary fiscal policy mix south african. Pakistan, peru, philippines, singapore, south africa, thailand. This game changing initiative has the potential to drive africas socioeconomic development and structural transformation. Jan 21, 2016 the south african reserve bank sarb and the national treasury nt, the respective custodians of monetary and fiscal policy, are naturally faced with the same set of macroeconomic conditions at any particular point in time. How citizens participate in macroeconomic policy unicef. In 1990, after three decades of brutal racial policies and the oppression of civil rights, the south african government began dismantling their discriminative laws and democratic elections were held in 1994. Almost everywhere in latin america, fiscal deficits were one of the criti cal problems that led to the debt crisis and rapid inflation during the. In the two graphics only about 54% of the time policy was seen to be coordinated. If low growth were to persist, however, government would have to adjust its spending plans, and determine which policies to implement, downsize or delay.
Analysing the effects of fiscal policy shocks in the south. Geography, demography, and economic growth in africa article pdf available in brookings papers on economic activity 219982. Fiscal policy implementation in subsaharan africa1 prepared by victor lledo and marcos poplawskiribeiro authorized for distribution by johannes mueller july 2011 abstract this paper investigates economic, political, and institutional constraints to fiscal policy implementation in subsaharan africa. However, this policy brief argues, through an examination of chinas role in tanzanias. How do taxes and spending in south africa redistribute. During the 1970s and early 1980s fiscal policy was centred on demand management. The distributional impact of fiscal policy in south africa.
Ersa shall not be liable to any person for inaccurate information or opinions contained herein. Automatic fiscal stabilisers could thus play an important role in complementing countercyclical monetary policy. Even after taking the fiscal package into account, the increase in south africas debttogdp ratio between 2009 and 2019 is. South africa s monetary and fiscal policy does seem a little disjointed and there is no clear evidence that our monetary and fiscal policy is coordinated. South africas fiscal policy south african market insights. Pdf fiscal policy and economic growth in south africa. Contractionary fiscal policy south africas fiscal policy. Pdf fiscal policy, employment, and output in south. It provides an analysis based on the innovative use of fiscal and household survey data to answer two main questions. In short, the share of mining in national output has more than halved in the postapartheid period. The objectives of fiscal policy have changed over time. What strikes one initially, in moving from a developed to an emergingmarket economy, is the remarkable similarity in the monetary policy process.
However, more needs to be done to improve the quality of service delivery although south africa s fiscal deficit and debt limits the fiscal space to spend more to achieve even greater redistribution. Below the article from statistics south africa the south african government spent 7,3% more in 201718 than it did in 201617. The views expressed are those of the authors and do not necessarily represent those of the funder, ersa or the authors affiliated institutions. Despite large fiscal deficits over the past decade, in which south africas debttogdp ratio has risen sharply, economic growth has not rebounded. More can and should be done to improve the quality of education and health service delivery. The south african economy like many others, most notably. South asia is poised to grow by about 7 percent in 2010 and nearly 8 percent in 2011, thanks to the strong recovery in india, good performances in bangladesh, postconflict bounce in sri lanka, recovery in pakistan, and turnarounds in other countries, including afghanistan, maldives, and nepal. So it looks like south africa s fiscal policy is to spend spend spend and if we run out of money lets borrow money to spend spend spend. Official pdf, 30 pages world bank documents world bank group. The purpose of the paper is to examine the effect of fiscal policy variables on economic growth in south africa. An overview of fiscal policy and unemployment in south africa south africa has been using a countercyclical fiscal policy which enables the government to respond flexibly to the effects of the economic cycle treasury, 2009. As the examples of south africa and mad agascar underscore, tax reform is one of the fiscal policy battlefields on which wars of attrition are fought between. We distinguish three categories of economic policies.
Saharan africa, b3 east asia, b4 south asia, b5 europecentral asia, b6 and middle. Pdf genetic variability of south african fiscal shrikes. Despite large fiscal deficits over the past decade, in which south africas debtto gdp ratio has risen sharply, economic growth has not rebounded. Economics department po box 392 unisa south africa, 0003. The stabilizing role of fiscal policy in latin america and the caribbean. In particular, this section provides an introduction to the role of fiscal policy rules in contributing to fiscal. Fiscal policy is a hot topic right now, as ratings agencies deciding on south africas credit ratings takes a very long hard look at south africas fiscal policy. Accounting for socioeconomic disparities in equalization grants for inclusive growth in subsaharan africa ssa a cross country case study. Consequently, the next objective in this study is to analyse one important element of protecting the revenue base, namely, possible leakages from it. Finally a third section proposes a fiscal rule that builds on the results in the first two sections to enhance the countercyclical outcomes of fiscal policy in south africa. Understanding the effects of fiscal policy on south africa hsrc.
The fiscal policy variables considered in the study include government gross fixed. South africa is a nation of about 55 million 2016 people of diverse origins, cultures, languages, and religions. The global economic recovery remains uneven, as growth in the united states is gaining momentum but appears to be at risk of stalling in the euro area and japan. As was the case in the past, economists from the policy arena, private sector and academia stimulated a lively debate. Local fiscal sustainability in south africa fiscal sustainability and measurement blanchart see burger 2001. Assessing fiscal risks the nature of south african politics broadly speaking, there are two main influences on south african economic policy. The decline in national saving in south africa has been attributed to the decrease in government saving, especially from the early 1980s to early 1990s tsikata, 1998. Understanding the effects of fiscal policy on south africa. Before taxes and social spending the income of the richest 10 % in south africa is more than times bigger than the poorest 10 %. Fiscal decentralization and igfr in the face of the new challenges of environmental costs and the needs of promoting the green economy. Fiscal decentralization in south africa fiscal division of powers as demonstrated in table 16. Fiscal consolidation, fiscal policy transmission, and current account dynamics in south africa christine s. The south african economy has over the years been steered from the monetary side.
However, more needs to be done to improve the quality of service delivery although south africas fiscal deficit and debt limits the fiscal space to spend more to achieve. This stance allows the government to borrow in a way that requires it to. Fiscal policy guides governments decisions about revenue, spending and borrowing. South africa s fiscal policy goes a long way towards achieving income redistribution but poverty and inequality in south africa after taxes and spending remains too high. It is true that there is little evidence of fiscal policy being used intentionally as a countercyclical policy tool since. Economic policy conduct in south africa is about micro and macroeconomic policies. Fiscal decentralization and public service delivery in south. South asias rebound since march 2009 has been strong and is comparable to that in east asia. Moreover, the fiscal policy was designed to solve the employment crisis through significant growth increases. It aims to promote investment and export expansion while enabling government to finance public services, redistribution and development in an affordable and sustainable budget framework. Social and physical infrastructure was considered as a main pillar for boosting economic growth and employment. It therefore follows that in principle one can expect the two policy. Department of economics, university of fort hare, alice main campus, private mail bag, x 14.
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