South Africa’s electricity crisis poses a significant threat to the country’s fiscal health, the International Monetary Fund (IMF) has warned.
According to the Daily Investor, the IMF has also urged that Eskom reduce its reliance on government funding.
The warning was given at the IMF’s Spring Meetings with the World Bank in April.
Speaking at the 2023 Fiscal Monitor Press Briefing, Paulo Medas, deputy director of the IMF’s fiscal affairs department, said South Africa’s electricity crisis and Eskom affect the country’s fiscal health in two ways.
The first, indirect, impact was on economic growth and tax revenues, potentially undermining the country’s fiscal accounts.
The second, direct, effect was Eskom’s requiring government support
In March the IMF lowered its 2023 economic growth projection for South Africa to a paltry 0.1%.
‘[This downward revision] mainly reflects the much more severe than expected outages in the energy sector, especially in the last quarter of 2022,’ said Daniel Leigh, who heads the World Economic Studies division in the IMF’s research department.
The second effect, the IMF said, was reflected in its 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 R254 billion Eskom debt bailout.
South Africa’s debt is expected to rise from R4.73 trillion in the current financial year to R5.84 trillion in the 2025/26 financial year.
‘So, the solution has to be to, obviously, address structurally the problems in the sector which will contribute to higher growth and reduce the need for future government support’, said Medas.
[Image: Kevin Schneider from Pixabay]