Public finance: South Africa

Abstract

Abstract provided by author:

This study entails examination of the structure, financing and implications of budget deficits and public debt in South Africa. A theoretical revIew of Public Finance explores the different fiscal policy options from a standard textbook perspective. For background information, actual and relevant fundamentals are examined, simulated and interpreted. This approach places the main research focus in context

The research question is : Do South African Budget Deficits really matter?

In an attempt to answer this question, a discernible and significantly strong to very strong association has been established between the budget deficit and capital market interest rates. It is therefore concluded, on this basis, that budget deficits do matter

Economic theory suggests that increased government expenditure, higher taxes and rising public debt are aIl associated with reduced private expenditure. In order to place the budget deficit in perspective, it was decided to introduce some of the views which are relevant to the current public debt debate in South Africa. It would appear that the current position does in fact merit calls for fiscal restraint

Indulgence in pure abstract economic. constructs is avoided in this report. A rather practical, coherent and simplistic approach is used to make this report accessible and user friendly