COVID-19 and the resulting national lockdown has wrecked havoc on the country’s economy, with the full impact yet to be fully felt.
A couple of months ago South Africa dug deep into its coffers to come up with R500 billion in COVID-19 support packages, but that has not proved enough.
Consequently the country reached out to the International Monetary Fund (IMF) for s sizeable loan to assist. Said loan has now been approved, with the executive board of the IMF offering up $4.3 billion (~R70 billion).
This request was made under the Rapid Financing Instrument (RFI) and should provide the country with a much-needed cash injection to aid COVID-19 relief efforts, but the long-term implications of taking such a sizeable loan are yet to be known.
The National Treasury, however, is less concerned about the long-term impact. This as they state that the R70 billion is a low-interest loan that will contribute to government’s fiscal relief package.
“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 Treasury adds.
Precisely how remains to be seen. There is also the issue of COVID-19-related corruption and misuse of funds to contend with, which the Presidency recently spoke about in an address to the nation.
Regardless, Finance Minister Tito Mboweni has welcomed the IMF loan, and he believes it can be put to good use.
“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,” he highlighted earlier this week.
“Going forward, government’s fiscal measures will build on policy strengths and limit the existing economic vulnerabilities that have been exacerbated by the Coronavirus pandemic,” the minister added.
The IMF loan is not the only emergency funding that the country has received of late, with the New Development Bank and the African Development Bank agreeing to loans of R17.3 billion and R5 billion respectively.
Here’s hoping all the additional funding will work as intended.