Fund.
IMF-SAfrica
IMF says joblessness is South Africa's biggest challenge
by Nathaniel Harrison
WASHINGTON, March 10 (AFP) - The South African economy has improved
markedly since July thanks to sound government policies, the IMF said here,
noting that authorities must now increase the country's economic growth to
combat soaring unemployment.
International Monetary Fund directors, according to a summary released
here
of their recent examination of the South African economy, also urged the
government to take further steps to curb inflation and to use caution in
liberalizing exchange controls.
South Africa's gross domestic product expanded 0.6 percent in 1998 and
1.2
percent last year, with inflation falling from nine percent in 1998 to 2.2
percent in 1999.
Unemployment came to 22 percent in 1997. While no figures were given for
the next two years, "the trend decline in formal private sector employment
continued ... and the official unemployment rate, which was 22 percent in
1997, most likely increased further," the IMF said.
"The key to generating high and sustainable output and employment growth
lies in the pursuit of policies aimed at further lowering inflation and
accelerating structural reform that would help tap the large pool of
unemployed and increase the skills of the labor force, increase domestic
investment, attract foreign investment and enhance efficiency," according
to
the IMF directors.
In further measures to boost employment, they urged authorities to scale
back wages for young trainees and to allow the Minister of Labor greater
power
to limit the extension of centrally negotiated wage agreements.
While a decline in interest rates helped spur a sharp recovery in
output,
any easing in monetary policy should be carried out only as long as
inflation
continues to fall toward a level found in South Africa's trading partners,
the
IMF said.
IMF directors also agreed that exchange controls should be liberalized
cautiously and replaced, when necessary, with prudential regulations.
The IMF assessment praised authorities for their response to financial
turmoil that shook emerging markets in 1998.
By keeping monetary policy tight, refraining from intervention in
foreign
exchange markets and pursuing stable fiscal policies, both investor
confidence
The directors also commended the government for progress made toward
trade
liberalization, noting "the strong international evidence linking trade
liberalization to higher productivity growth."
nh/ch
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