The governor of South Africa’s central bank has urged the government to stick to the debt reduction plan, so that the National Treasury prepares to issue medium-term fiscal policy. announced next week.

“Fiscal consolidation is necessary and not restrictive,” Lesetja Kganyago told a forum hosted by former President Kgalema Motlanthe’s foundation in southeastern South Africa on Friday.

“Debt stabilization reduces risk and allows interest rates to fall on the yield curve. It would also avoid fiscal dominance, where central banks would lose the ability to protect the value of currencies due to fiscal failure. Finance Minister

Enoch Godongwana will present his second medium-term budget on Wednesday. The Treasury faces growing pressure to agree to civil servants’ demand for an inflation-fighting wage increase and an extension of the monthly social allowance of 350 rand ($19) that will thwart plans to rein in inflation. budget deficit and control the skyrocketing public debt.

South Africa’s public finances deteriorated dramatically during the nearly nine-year rule of former President Jacob Zuma, when corruption was rampant and public procurement budgets plundered. Losing state-owned enterprises, including the electric power company Eskom Holdings SOC Ltd., have received a flurry of bailouts and the government has repeatedly failed to rein in their wage bills.

Zuma was forced to resign in 2018.

Recent success in rebuilding fiscal reserves means the country is better positioned to deal with the deteriorating global economic outlook, Kganyago said in an interview with Bloomberg last week.

The primary budget deficit, South Africa’s most important fiscal anchor, narrowed more than expected in the year to March 2022, and the public debt-to-raw domestic product ratio also exceeded estimates of the national treasury, according to central bank figures