(Adds IMF quotes, background)
JOHANNESBURG, Nov 8 (Reuters) - South Africa should implement reform to restore confidence in the economy soon, the International Monetary Fund said on Wednesday, citing rising domestic political uncertainty and stalled reforms that signalled a challenging economic outlook.
South Africa’s Finance Minister Malusi Gigaba painted a gloomy picture of the economy in his medium term budget speech on Oct. 25, saying the country faced sluggish growth, shortfalls in revenue, rising debt and costly bailouts of struggling state-owned companies.
“IMF staff anticipates that the subdued economic growth of 0.7 percent, projected by the authorities for 2017, is not likely to improve much in 2018,” the IMF said in a statement.
“Early announcement and timely implementation of a strong adjustment and reform plan is now a priority to restore investor and consumer confidence.”
The IMF said it welcomed the Treasury’s candid acknowledgement of the challenges facing the economy.
But the government needed to signal political will to deal with long-standing issues that have led to deteriorating market sentiment, the fund said.
“Reforms to improve governance and procurement practices and remove any obstacles to investment are essential,” the IMF said.
The lender said emphasis should be placed on the implementation of sanctions against deviations from the Public Financial Management Act.
The economic gloom is compounded by political uncertainty before an African National Congress conference in December. The conference will elect a new party leader to succeed President Jacob Zuma, who is battling several scandals, including corruption allegations.
Zuma has denied any wrongdoing. He can remain president of the country until 2019.
South Africa’s economic troubles are also compounded by allegations of corruption in awarding of contracts in state-owned companies and claims of influence-peddling in government that have hurt investor confidence. (Reporting by Olivia Kumwenda-Mtambo; Editing by James Macharia)