Question 1 (20 Marks)

As a policy analyst employed by the International Monetary Fund (IMF), you are required to prepare a report that is focused on the rapidly rising worldwide public debt levels. The report will cover several countries in both the developing and the developed world (South Africa, Japan, USA, China, Sri Lanka and Greece).

Critically evaluate the possible (short and long term) impact of rising public debt levels on South Africa’s economic trajectory and performance.

Question 2 (15 Marks)

South Africa’s public debt to GDP ratio pales in comparison to that of countries such as Japan and the USA. Analyse the reasons why Japan and the USA are able to sustain such high levels of debt to GDP

Question 3 (15 Marks)

South Africa’s State Owned Enterprises are responsible for the large debt levels (around R700bn as of May 2022) and this has contributed to South Africa’s credit ratings being downgraded. Analyse the feasibility and possible impact of TWO (2) solutions that can be applied to address the SOE public debt.

Question 4 (20 Marks)

Assess the impact of the structural adjustment programmes on Greece’s economy for the period 2012
– 2017

Question 5 (30 Marks)

Sri Lanka in May 2022, defaulted on its debt repayment obligations. Briefly discuss the main issues that led to Sri Lanka’s inability to meet its repayment schedule. (10 marks)

Discuss the measures that the government of Sri Lanka could take to ensure economic recovery and growth

Answers to Above Questions on Managerial Economics

Answer 1: Public debt is defined as that amount of money which is owed to the public by the government. Government usually undertakes several activities for the development of an economy, and to finance those activities, the government takes loans. When the expenditure exceeds the revenue, it requires the government to borrow more money which leads to a deficit. This rising public debt level can have a significant impact on the performance of an economy. In respect to South African economy, the impact of rising public debt level can be negative, as it would lead to higher interest payment by the government, chances of higher inflation level because a rising debt level would put more pressure on the economy, and the credit rating with also be adversely affected as a result of increasing public debt level.

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