Government spending keeps inflation high and growth low – Reserve Bank

South Africa’s strained public finances are hindering economic growth and a return to lower inflation, the country’s central bank cautioned on Tuesday.

“Reducing public debt to sustainable levels can deliver a triple dividend, namely lower cost of capital, reduced debt-service costs and lower inflation,” the South African Reserve Bank said in its six-monthly Monetary Policy Review.

The comments come ahead of a 1 November update on the nation’s 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.

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.