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South Africa To Sacrifice Growth To Avoid A ‘Debt Trap’

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http://www.bloomberg.com/news/2014-10-22/south-africa-to-sacrifice-growth-to-skirt-risk-of-debt-trap-.html

South Africa will sacrifice economic expansion in the next two years by limiting spending growth and raising more taxes as it seeks to avoid a debt trap.

The government will cut its expenditure limit by 25 billion rand ($2.3 billion) and plans 27 billion rand of “structural increases” in revenue in the period, the National Treasury said in the mid-term budget released in Cape Town today.

“We have reached the turning point,” Finance Minister Nhlanhla Nene told reporters before his budget speech to Parliament. “Fiscal consolidation can no longer be postponed.”

South Africa is cutting back on consumption spending as total debt approaches 50 percent of gross domestic product, a level the government considers unsustainable. Tighter fiscal policy at a time when the central bank is raising interest rates to curb inflation may limit economic output and delay efforts to slash a 25.5 percent jobless rate.

Wow sacrificing the growth hysteria mantra. A radical approach if they are going to try doing this.

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