The National Treasury wishes to announce that the International Monetary Fund released its 2004 Article IV Staff Report on South Africa today.
South Africa's external position has strengthened over the past year. A major milestone was reached with the closure of the South African Reserve Bank's forward book in the foreign exchange market in February 2004, and the SARB has since replenished its net international reserves. A further increase in reserves would help reduce currency volatility and keep long-term interest rates low. As at the end of June 2004 gross reserves stood at US$ 11.4 billion, while short-term debt is estimated at around US$ 11 billion.
South Africa's external debt situation remains very comfortable.
A budget deficit in the region of 3 percent of GDP should be considered the upper limit of what is desirable to maintain macroeconomic stability and to keep indebtedness under control. An important spending initiative that has been adopted is the universal provision of antiretroviral MIV/ AIDS drugs through the public health system. The deficit for 2004/05 is targeted at 3.1 percent GDP, compared with a deficit of 2.
Rigidities, skill deficiencies, and relatively high costs in the labour market impede efforts to reduce unemployment. It is proposed that more be done to enhance job skills, remove barriers job creation, and increase labour mobility.
Further liberalization of South Africa' trade regime and implementation of the privatisation program should be stepped up as it would raise productivity and enhance South Africa's international competitiveness.
The implementation of initiatives that reduce income and wealth disparities is necessary and desirable for maintaining social cohesion.
South Africa continued to play a leadership role in conflict resolution and poverty reduction in Africa.
For further information please contact Thoraya Pandy on 012 315 5944.