the eyes of the public would be enhanced. in exceptional situations, the rules need to allow flexibility, but this should be based on predetermined and consistent criteria. 3 / 5 bis central bankers'speeches an expenditure rule can be defined as a medium - term ceiling for the growth of government expenditure, set in relation to the estimated future economic growth and taking into account the stock of public debt. such a rule would probably serve more effectively as an operational fiscal policy guide than the current rule that is based on the structural fiscal balance. the so - called automatic stabilizers, such as increased expenditure through unemployment insurance in an economic recession, are important mechanisms of economic adjustment in the eurozone countries. the expenditure rule would not prevent the operation of automatic stabilizers. the expenditure rule supports responsible fiscal policy, as we have seen in countries like the netherlands, sweden and finland where it has been used over the past decades. recent research by the imf has come by and large to a similar conclusion : the compliance rate of expenditure rules is greater than that for budget balance rules, especially if it is directly under the control of the government and the rule is enshrined in law or in a coalition agreement. empirical research also indicates that the presence of expenditure rules is associated with stronger fiscal performance, i. e. a higher primary balance and countercyclical fiscal policies. finally, it is essential to repeat the paramount importance of national ownership of responsible fiscal policies. both an expenditure rule and an independent fiscal council can be valuable tools for that goal – but they are only tools, which should be used well. it is worth quoting the director of the imf ’ s fiscal department, vitor gaspar, and his co - authors : “ one extreme and dangerous manifestation … is the expressed perception by many analysts that european fiscal governance releases countries from their national responsibilities. nothing could be further from the truth : fiscal policy is, first and foremost, a national responsibility. ” several eu member states have in fact lived in line with gaspar ’ s recommendation and used the eu rulebook as an instrument to reinforce national ownership of fiscal policy. belgium, denmark, luxembourg and the netherlands introduced national expenditure rules in 1992 in response to the maastricht treaty and its debt and deficit rules. sweden and finland followed suit after becoming members of the eu in 1995. germany went so far as to introduce a constitutional debt brake, which has recently been discussed in germany and criticised for its excessive rigour that may prevent the

##ncies have stabilised, even though they remain much weaker than pre - crisis levels. south africa is no exception : the south african rand is currently trading at about r17. 00 / us $, weaker than the january 2020 average of r14. 40 / us $ but much improved from early april lows of r19. 00 / us $. shorter - dated government bond yields are now trading lower than at the start of 2020, though yields on longer - dated bonds are higher, probably reflecting higher credit risk and debt issuance. 4. interest rates are likely to stay low over the next two years the economic shock from covid - 19, however, will probably take longer to subside than its financial counterpart, despite the combination of fiscal and monetary support provided. global activity has rebounded from the lows of april ( when most of the world faced a strict lockdown ), as restrictions on economic activity and people ’ s mobility have been lifted. but activity indicators are still significantly below pre - crisis levels, and as activity gradually converges towards ‘ normal ’ levels, the pace of convergence slows. some commentators argue that the harder part of the economic normalisation begins now. in most countries, private and official institutions, on balance, do not project a return of real gdp to pre - covid - 19 levels until late - 2021 or even late - 2022. negative output gaps are expected to be the norm. with respect to unemployment, the consensus view is that normalisation will take even longer. south africa has been gradually lifting restrictions on economic activity since late april ; both fiscal and monetary policies were eased significantly to help facilitate the economic recovery. on the monetary front, the sarb ’ s mpc lowered the repo rate by a cumulative 275 basis points between march and july ; the bulk of the reduction ( 250 basis points ) occurred between the march and may meetings − a fast response by the standards of large emerging markets. to facilitate the flow of credit to cashconstrained businesses and individuals, the sarb injected liquidity in money markets through larger and more frequent repo operations. it also temporarily relaxed some regulatory capital requirements for banks. finally, the sarb purchased government bonds in the secondary market to ensure liquidity and the smooth functioning of the bond market. nonetheless, the plunge in second - quarter economic activity, when real gdp fell at an annualised rate of 51 %, could not be reversed. base effects, admittedly, will result in spectacular growth