By Khulile Thwala
The International Monetary Fund (IMF) has warned that South Africa’s electricity crisis poses a significant threat to the country’s fiscal health.
It has also stated that Eskom must reduce its reliance on government funding. Paulo Medas, Deputy Director of the IMF’s fiscal affairs department said SA’s electricity crisis and Eskom affects the country’s fiscal health in two ways.
The first effect is indirect, as they impact economic growth and tax revenues. This undermines SA’s fiscal accounts. In March, the IMF lowered its 2023 economic growth projection for SA to a measly 0.1 per cent – a 1.1 per cent downward revision.
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The IMF followed a host of organisations that have also taken a more bearish view of the country’s growth prospects, including rating agency Fitch Solutions.
“This downward revision mainly reflects the much more severe than expected outages in the energy sector, especially in the last quarter of 2022,” said Dani Leigh, who heads the World Economic Studies division in the IMF’s research department.
The second effect is direct, as Eskom requires government support, reflecting the IMF’s projections for South Africa’s debt numbers. The country’s debt burden has risen steadily over the last decade but is
set to increase even further following the government’s E254 billion (R254 billion) Eskom debt bailout.
