Wide ranging budget cuts will do much damage to the economy as they reduce aggregate demand for goods and services
, which is what the economy sorely needs. Our finances are indeed in a mess but so is the real economy. SA’s statistician-general has revealed the manufacturing sector shed 30,000 jobs; construction 24,000; trade 21,000 and utilities 18,000. If we fix the debt problem and neglect the real economy what will we achieve?
But it is not enough. We badly need a stimulus to kick-start economic activity. Financing should come from a variety of sources in order to spread risk. We can tolerate a slight increase in inflation as international evidence has shown. The government faces the same choice. If you use your debt to pay for bonuses, luxury cars, corruption and Gupta TV stations then you will go down and this is what we have done for a long time.
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