Tough fiscal decisions are required, not reckless financing proposals

23 May 2021 - 00:00 By Dondo Mogajane

In "It's not the wage bill that's the problem, it's the austerity budget" (https://www.timeslive.co.za/sunday-times/opinion-and-analysis/2021-05-16-its-not-the-wage-bill-thats-the-problem-its-the-austerity-budget/) in the Sunday Times of May 16, Duma Gqubule argues that fiscal consolidation (reducing spending or raising taxes to close the budget deficit) is unnecessary. Much easier, he argues, to adopt a new paradigm in which the Reserve Bank funds the deficit directly by printing money, or where the Government Employees Pension Fund (GEPF) finances the deficit by buying government bonds.

His piece touches on important debates around fiscal consolidation, but its core argument is reckless and wrong. A radical change in the monetary policy regime - from one that focuses on preserving the value of the rand to one that is driven by the government's financing needs - would cause immense damage to the economy...

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