South Africa has been granted a loan request of $4.3 billion (R70.6 billion) by the International Monetary Fund to help mitigate the adverse social and economic impact of the COVID-19 pandemic. It is a low-interest loan, and will be used to contribute towards government’s fiscal relief package.
“The country has been hard hit by the pandemic, and this required government to come up with fiscal and monetary measures that would respond to the struggling economy and contain its negative effects to society,” said Minister of Finance Tito Mboweni.
The Minister said this during a Special Adjustments Budget in Parliament on June 24, which laid out the interventions government will be using in the COVID-19 pandemic. Public spending budgets and priorities are also being re-looked at pertaining to COVID-19-related interventions and economic recovery efforts.
The relief package will:
– Protect the most vulnerable
– Support health and frontline services
– Drive job creation
– Unlock economic growth through reforms
– Stabilise public debt
“Government’s Covid-19 economic support package directs R500 billion straight at the problem. This is one of the largest economic response packages in the developing world,” Mboweni said. “The South African Reserve Bank has reduced interest rates and made it easier for banks to lend money, and supported liquidity in the domestic bond market. Government spending and tax proposals, as well as the loan guarantee scheme and wage protection measures, are providing protection to workers and the poor, while assisting to stay afloat during these tough economic times.”
Last week, South Africa also secured a loan of R5-billion from the African Development Bank to help in the fight against the COVID-19 pandemic.
“Without external support, these borrowings will almost entirely consume all of our annual domestic saving, leaving no scope for investment or borrowing by anyone else. For this reason, we need to access new sources of funding,” Mboweni said. “Government intends to borrow about $7 billion from international finance institutions to support the pandemic response. We must make no mistake, these are still borrowings. They are not a source of revenue. They must be paid back.”
There have been mixed reactions to the approval of the IMF loan. Here is what South Africans had to say:
“If you have R500-billion Relief Fund, what do you want the IMF loan for? LIES!” one social media user commented.
“I’m not saying South Africans are in a bad place nationally or anything, but it’s barely an hour since the IMF loan was announced and many have already given it up as good as looted,” another said.
“Majority of those who applied for that IMF loan won’t be alive when it has to be paid back but we and our kids will be,” another said.