Mboweni on South Africa’s R70 billion IMF loan

Finance minister Tito Mboweni says that the International Monetary Fund’s (IMF’s) loan to South Africa will not ‘be earmarked specifically for the payment of salaries’.

Responding in a written parliamentary Q&A, the finance minister said that the loan is a special facility created for member countries experiencing emergencies.

“It is called a Rapid Financing Instrument (RFI), and does not bear conditionalities, nor does it require the implementation of an IMF structural programme,” he said.

“Countries, however, receiving IMF emergency financing have committed to transparently utilising and reporting spending. Thus, the loan receipts (or disbursements) will form part of the National Revenue Fund to be used to support existing government programmes, which could include salary payments.”

Mboweni said that access to the RFI was specifically expanded to help countries deal with the balance of payments (BOP) problems arising from the Covid-19 pandemic.

He said that the loan provides a low-interest opportunity for South Africa to provide counter-cyclical support to the economy and fund Covid-19 related emergency support.

“In other words, it mitigated the need for massive spending cuts in response to the dramatic revenue shortfalls of government, and avoided an explosion in the financing needs brought on by high-cost borrowings,” he said.

“The reporting on the loan’s use will form part of the general responsibility of government of publishing all information related to Covid-19-related support programmes, including procurement.”

Loan

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) in July 2020.

The IMF has previously said that it will not impose any conditions over and above what is in South African law on how the funds can be used.

This means that the funds will be subject to the same procurement and accounting requirements as all other budgetary expenditure.

In addition, the government will have to account in its future budget statements and reports to parliament on how the funds have been used.

South Africans will also be able to demand that the government demonstrate that the funds have been spent consistently with the requirements of the constitution and bill of rights.

This means the government should show that it is using the maximum available resources, from whatever source, to help realise all the rights that the constitution and South Africa’s international commitments grant to South Africans.

The IMF requires that South Africa repay the funds to the IMF over 20 months beginning 40 months after the loan is disbursed.


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Mboweni on South Africa’s R70 billion IMF loan