Synopsis of Fiscal Policy in South Africa: 1994–2020

Eliphas Ndou and Nombulelo Gumata
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Nombulelo Gumata: Eldoreigne X3

Chapter Chapter 2 in Fiscal Policy Shocks and Macroeconomic Growth in South Africa, 2023, pp 11-22 from Springer

Abstract: Abstract This chapter sets the scene for the analysis contained in this book by presenting a synopsis of fiscal policy and the macroeconomy during the period 1994–2020. What do the last 34 years suggest about the fiscal policy framework? Did it perform as expected in supporting South Africa to absorb asymmetric unexpected shocks? Did the countercyclical fiscal policy implemented in 2009 perform as expected? We establish that the policy of commitment to debt consolidation supported by expenditure reduction, aggressive revenue collection measures, and robust GDP growth was a big driver of fiscal policy between 1994 and 2008. The commitment to reduce the stock of debt and increase GDP growth characterised the fiscal policy stance during this period. Furthermore, the prolonged decline in the government debt growth and the debt-to-GDP ratio coincided with the prolonged period of disinflation that resulted in the prolonged monetary policy easing cycle. During this period, GDP and investment growth were robust, and the unemployment rate was low. This did not come at the expense of monetary policy credibility. The policy implication is that South Africa should adopt a formal fiscal anchor and rules to enhance the conduct of fiscal policy credibility and foster close coordination between monetary policy and fiscal policy.

Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-031-37755-6_2

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DOI: 10.1007/978-3-031-37755-6_2

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