Fiscal sustainability in South Africa: Will history repeat itself?

Stellenbosch Working Paper Series No. WP07/2013
 
Publication date: 2013
 
Author(s):
[protected email address] (Department of Economics, University of Stellenbosch)
[protected email address] (Department of Economics, University of Stellenbosch)
[protected email address] (Department of Economics, University of Stellenbosch)
 
Abstract:

Several empirical studies have found that fiscal policy has been sustainable in South Africa since 1960. This paper complements these studies by providing perspective on the manner in which fiscal sustainability was maintained. It discusses two episodes of significant increases and one period of substantial reduction in the public debt burden to show that periods of rising deficits and government debt in South Africa were followed by returns to sustainable levels, thereby preventing major domestic economic crises and external interventions. The paper also provides a projection of the fiscal outlook for South Africa based on a structural VAR model. The results suggest that the discretionary fiscal decisions of 2007 to 2010 might pose a serious threat to the sustainability of fiscal policy unless the authorities respond as they did in the past by checking large budget deficits and concomitant rapid increases in the public debt burden promptly.

 
JEL Classification:

H62, H63

Keywords:

fiscal policy, fiscal sustainability, South Africa

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14 October 2019
While incoming data on the global economy remains downbeat, the mood was lifted last week after progress was made on US-China trade talks and Brexit negotiations. On the domestic data front, mining and manufacturing data for August added to growing evidence that real GDP growth likely slowed significantly in 2019Q3 after the nice rebound recorded in...

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