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Fiscal Sustainability in South Africa: Will History Repeat Itself?

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  • E. Calitz
  • S.A. du Plessis
  • F.K. Siebrits

Abstract

Several empirical studies have found that fiscal policy has been sustainable in South Africa since 1960. This paper complements these studies by providing perspective on the manner in which fiscal sustainability was maintained. It discusses two episodes of significant increases and one period of substantial reduction in the public debt burden to show that periods of rising deficits and government debt in South Africa were followed by returns to sustainable levels, thereby preventing major domestic economic crises and external interventions. The paper also provides a projection of the fiscal outlook for South Africa based on a structural VAR model. The results suggest that the discretionary fiscal decisions of 2007 to 2010 might pose a serious threat to the sustainability of fiscal policy unless the authorities respond as they did in the past by checking large budget deficits and concomitant rapid increases in the public debt burden promptly.

Suggested Citation

  • E. Calitz & S.A. du Plessis & F.K. Siebrits, 2014. "Fiscal Sustainability in South Africa: Will History Repeat Itself?," Studies in Economics and Econometrics, Taylor & Francis Journals, vol. 38(3), pages 55-78, December.
    • Handle: RePEc:taf:rseexx:v:38:y:2014:i:3:p:55-78
    DOI: 10.1080/10800379.2014.12097272
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    References listed on IDEAS

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    1. Black, Philip & Calitz, Estian & Steenkamp, Tjaart, 2015. "Public Economics," OUP Catalogue, Oxford University Press, edition 6, number 9780199059089.
    2. Schmidt-Hebbel, Klaus, 1996. "Fiscal Adjustment and Growth: In and Out of Africa," Journal of African Economies, Centre for the Study of African Economies, vol. 5(3), pages 7-59, October.
    3. von Hagen, Jurgen & Strauch, Rolf R, 2001. "Fiscal Consolidations: Quality, Economic Conditions, and Success," Public Choice, Springer, vol. 109(3-4), pages 327-346, December.
    4. Stan du Plessis & Willem Boshoff, 2007. "A fiscal rule to produce counter-cyclical fiscal policy in South Africa," Working Papers 13/2007, Stellenbosch University, Department of Economics.
    5. International Monetary Fund, 2010. "A Historical Public Debt Database," IMF Working Papers 2010/245, International Monetary Fund.
    6. Gauthier Tshiswaka-Kashalala, 2006. "Is Fiscal Policy Sustainable in South Africa? An Application of the Econometric Approach," Working Papers 200614, University of Pretoria, Department of Economics.
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    Citations

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    Cited by:

    1. Hylton Hollander, 2024. "Debt-financed fiscal stimulus in South Africa," Studies in Economics and Econometrics, Taylor & Francis Journals, vol. 48(1), pages 87-112, January.
    2. Fofana, Ismael & Goundan, Anatole & Magne, Léa, 2014. "Simulation des impacts de la politique d’autosuffisance en riz de l’Afrique de l’ouest," Conference papers 332560, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    3. Havemann, Roy & Hollander, Hylton, 2024. "Fiscal policy in times of fiscal stress (or what to do when r > g)," Journal of Policy Modeling, Elsevier, vol. 46(5), pages 1020-1054.
    4. Xolisa Vayi & Andrew Phiri, 2018. "A sequential panel selection approach to cointegration analysis: An application to Wagner’s law for South Africa," Working Papers 1831, Department of Economics, Nelson Mandela University.
    5. Xolisa Vayi & Andrew Phiri, 2018. "A Sequential Panel Selection Approach to Cointegration Analysis: An Application to Wagner’s Law for South African Provincial Data," Economic Research Guardian, Weissberg Publishing, vol. 8(1), pages 25-39, June.
    6. Gabriel Temesgen Woldu, 2020. "Do fiscal regimes matter for fiscal sustainability in South Africa?: A Markov-switching approach," WIDER Working Paper Series wp-2020-163, World Institute for Development Economic Research (UNU-WIDER).

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    More about this item

    JEL classification:

    • H62 - Public Economics - - National Budget, Deficit, and Debt - - - Deficit; Surplus
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt

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