National Treasury director-general Dondo Mogajane says that the R70 billion loan from the International Monetary Fund (IMF) will assist South Africa’s efforts in fighting the coronavirus pandemic but will not impact its national sovereignty.
In an interview with 702, Mogajane said that the government will be able to live up to the expectations and commitments set out by the loan.
“I think it is important that South Africans be comfortable and know that we did not put the country at risk, and the sovereignty of the country is intact in term of what we have agreed to with the IMF.
“We will be finalising the details in the next few days, but we are excited that the Covid-19 response will be boosted by this loan and we will make sure the money is spent within the prescripts of the law.”
Mogajane acknowledged that while the money may be put to good use now, there are serious implications for the future of the country going forward.
He noted that the R304 billion under-collection from the tax base meant that Treasury was forced to balance the books and look to alternative means of funding.
Mogajane further indicated that this loan was a planned ‘one-off’ and that there are no plans to return to the IMF going forward.
“Let’s cross that bridge when we come to it. Currently, we are not intending to have any other engagements with the IMF. At no point are we even contemplating going with bigger problems to the IMF.
“For now it is what it is, and it is supporting us in specific areas and we hold ourselves accountable in specific areas at this point in time in the history of our country.”
Mogajane said that if South Africa gets its reforms right, there is no need for the country to go to the IMF or other international body. He added that the government is in talks with labour unions about the high public-sector wage bill.
“It is fair to say that (looking at) the kitty, we are not able to sustain ourselves. So we have to ensure that we are able to live within our means.”
The relief package will:
- Support health and frontline services;
- Protect the most vulnerable;
- Drive job creation;
- Unlock economic growth through reforms;
- Stabilise public debt.
On Monday, the IMF approved a request from South Africa for emergency financial support under the Rapid Financing Instrument (RFI) for an amount of $4.3 billion (R70.6 billion) to help mitigate the adverse social and economic impact of the Covid-19 pandemic.
The additional IMF funding is a low-interest loan that contributes to government’s fiscal relief package while respecting South Africa’s decisions on how best to provide relief to the economy and those worst affected by the current crisis.
It will also pave the way for government to provide the necessary financial relief required to forge a new economy and mitigate further harm to the economy, the IMF said in a statement on Monday evening (27 July).
“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,” it said.
Last week South Africa secured a loan of about R5 billion ($304 million) from the African Development Bank to assist with fighting the coronavirus pandemic.
The loan is the second from a multilateral lender after the country received a $1 billion emergency facility from the New Development Bank in June to help offset the damage caused by the virus and finance the government’s R500 billion stimulus package.