Mired in its worst economic crisis since the Great Depression, one has to hope the SA government will heed the adage that a good crisis should never be allowed to go to waste. Maybe then it will move resolutely ahead with its request for a fully fledged IMF financial programme in support of the basic economic reforms the country so desperately needs.
Hardly in the best of health on the eve of the Covid-19 pandemic, the country, along with the rest of the global economy, is now being ravaged by a once-in-a-century health crisis. That has occasioned a number of economic lockdowns that have had devastating consequences for both the overall economy and its public finances. It has also resulted in a collapse in international demand for SA’s exports and very weak international commodity prices.
After earlier in the year experiencing large capital outflows and a financial market meltdown, SA, along with the other emerging market economies, is now experiencing a reprieve. It is doing so on the back of the vast amount of liquidity being pumped into the global financial markets by the US Federal Reserve and European Central Bank. However, it would be a grave mistake to think these favourable global liquidity conditions will last forever.
One has to hope that in any IMF negotiation, the SA government and the IMF address the major structural impediments that have hobbled the country’s growth prospects over the past decade.