Although South Africa is regarded as an “economic powerhouse” in Africa and has a strong modern industrial and financial base, it faces severe developmental challenges: poverty, high level of inequality, unemployment…” (Fourie and Burger 2003: 4). The Human Development Index for South Africa is 0.653 which gives the country a rank of 121st out of 127 nations (United Nations 2007). In this way, the South African economy faces two main issues: to ensure sustainable development, which is defined as “… development that meets the needs of the present without compromising the ability of future generations to meet their own needs” (Brundtland Commission 1987:43 cited in Fourie and Burger 2003:2) and to globalize successfully (Fourie and Burger 2003: 10).
[...] After studying the objectives of the South African fiscal and monetary policy, we are going to make a critical assessment of these developed targets. We will explain the views of the government, the Reserve Bank, as well as those of other role players in the economy, such as COSATU. Critical assessment and overview of these macroeconomic objectives As we analyzed in the previous part and according to Fourie and Burger (2003: the government and business support a causality from sustainable fiscal policy to economic growth and then to development. [...]
[...] However, according to Burger (2007), growth rate may be possible” to reach, but be sufficient to absorb the unemployed to such an extent that the unemployment rate and poverty is halved in the next seven years.” After analyzing the challenges and the objectives of the SA government, we can study those of the Reserve Bank The SA monetary policy objectives In contrast to the government, the Reserve Bank has an official mission statement in which its objectives are formulated explicitly and clearly. [...]
[...] These resources have to grow but necessitate a higher economic growth rate, which make it easier for government to “maintain a sustainable fiscal policy” and then integrate the economy into the global economy”. I n conclusion, we can say that although the fiscal and monetary policies objectives differ in some points, the Government and the Reserve Bank aspire to create a better world for South African people and face severe developmental challenges. Nevertheless, these policies do not enough for maintain robust and sustainable development in South Africa. [...]
[...] To achieve these goals, the South African government has developed two key economic policy developments since 1994 (end of the apartheid): the Reconstruction and Development Programme (RDP) (1994) and the Growth, Employment and Redistribution plan (GEAR) (1996). The aim of the RDP is to improve the service delivery to the poor and to create a great environment for human development. This programme increases government expenditure to education, health, welfare, safety and security and infrastructure. The aggregate government expenditure in 2006 was R 323 Billion: of GDP (SARB 2007: S-104, S-145). [...]
[...] The decision to increase the repo rate has these chain reactions (The Keynesian transmission mechanism): Higher repo rate ( Banks pay more for Reserve Bank accommodation ( credit creation process of banks discouraged ( money supply contracts ( excess demand in the money market ( upward pressure on interest rate ( investment discouraged ( aggregate expenditure declines ( production discouraged ( Income and real GDP decline ( downswing of the economy ( Price falls In this way, the Reserve Bank indirectly affects the interest rates in the economy, by the use of the repo rate to achieve its objectives Comments 1 To what extent does the government pursue the same objectives as the Reserve Bank? [...]
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