Does SA Need A Fiscal Crisis?
by George Glynos, Managing Director and Chief Economist, ETM Analytics (Pty) Ltd.
SA has been heading down a road of unsustainable government expenditure for several years now, in the hope that the illusive growth the government is searching for will materialise to boost government tax revenues and rebalance SA’s fiscal position. This has not materialised. Instead we are now dealing with an environment where government expenditure has gradually increased relative to GDP and where the budget deficit has not been reduced over the past five years. It is a dangerous situation resulting in credit ratings downgrades. Unless there is a significant reduction in government profligacy and greater respect shown for SA’s stretched tax base, SA may be forced to consider a series of unpleasant austerity measures of its own. All avoidable.
Does SA need a fiscal crisis?
It is a rhetorical question of course. No-one wants or needs to live through a fiscal crisis. It is massively destructive to say the least and would precipitate considerable reforms which would initially be very destabilising from both a financial and a socio-economic perspective.
Why the question then? To raise awareness of the lack of progress in addressing SA’s fiscal decline and to highlight how the only event that might prompt a full-scale reassessment of the fiscal status quo might be a crisis that jolts SA authorities into taking stock.