South Africa\u2019s strained public finances are hindering economic growth and a return to lower inflation, the country\u2019s central bank cautioned on Tuesday.<\/p>\n\n\n\n
\u201cReducing public debt to sustainable levels can deliver a triple dividend, namely lower cost of capital, reduced debt-service costs and lower inflation<\/strong>,\u201d the South African Reserve Bank said in its six-monthly Monetary Policy Review.<\/p>\n\n\n\n The comments come ahead of a Nov. 1 update on the nation\u2019s budget outlook by Finance Minister Enoch Godongwana. He is expected to announce a large revenue shortfall and wider-than-expected budget deficit, aggravated by slower growth and weaker earnings from commodity exports.<\/p>\n\n\n\n Godongwana is being pressed by other cabinet ministers in the ruling African National Congress to climb down from proposed austerity measures designed to rein in debt and meet stabilization targets in the wake of drastically lower-than-expected revenue.<\/p>\n\n\n\n Bond Yields<\/strong><\/p>\n\n\n\n South African government bond yields have climbed above 12% in recent months even as the country\u2019s inflation rate has declined to 4.8% from above 7%, as investors weigh threats to the public purse. The central bank aims for inflation at the midpoint of its 3% to 6% target range.<\/p>\n\n\n\n Consumer prices in September, scheduled for release on Wednesday, are expected to increase 5.4% on an annual basis, according to economists surveyed by Bloomberg.<\/p>\n\n\n\n The review confirmed the central bank\u2019s forecast for 0.7% economic growth this year, aided by stronger-than-expected investment and continued spending.<\/p>\n\n\n\n Even so, the central bank flagged additional spending pressures, citing a swelling public sector compensation bill, while debt-service costs have risen sharply.<\/p>\n\n\n\n \u201cWith reduced tax revenue, higher public sector compensation and state-owned enterprise, financial needs will put additional pressure on financing conditions,\u201d the bank said.<\/p>\n\n\n\n El Nino<\/strong><\/p>\n\n\n\n While inflation has softened, the central bank made clear that it was premature to declare victory, stressing the risks of elevated price pressures remain.<\/p>\n\n\n\n These include the impact of the El Nino weather pattern, which the central bank said \u201cputs South Africa at a high risk of a drought later this year, jeopardizing the expected food price disinflation.\u201d<\/p>\n\n\n\n Overall, the central bank took a conservative view on how quickly inflation will slow toward its preferred goal, noting that due to the stickiness of so-called core prices, which strip out food and energy, \u201cheadline inflation\u2019s sustained return to the midpoint of the target range is projected to take some time.\u201d<\/p>\n","protected":false},"excerpt":{"rendered":" The South African Reserve Bank has outlined how the government can remove a hurdle to economic growth and deliver lower inflation.<\/p>\n","protected":false},"author":59,"featured_media":704957,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[23,1],"tags":[1850,3619],"class_list":["post-725508","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-government","category-trending","tag-bloomberg","tag-sarb"],"_links":{"self":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/725508","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/users\/59"}],"replies":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/comments?post=725508"}],"version-history":[{"count":3,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/725508\/revisions"}],"predecessor-version":[{"id":725514,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/posts\/725508\/revisions\/725514"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media\/704957"}],"wp:attachment":[{"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/media?parent=725508"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/categories?post=725508"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/businesstech.co.za\/news\/wp-json\/wp\/v2\/tags?post=725508"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}