South Africa is entitled to as much as $4.2 billion in emergency funding from the International Monetary Fund should it request financial support to fight the coronavirus, and it could do so with few strings attached.
Some senior officials in the ruling African National Congress and its alliance partners have shot down a suggestion by Finance Minister Tito Mboweni that the government might seek help from multilateral lenders for health funds, saying the structural adjustments associated with loans from the institutions would undermine the nation’s sovereignty.
However, Montfort Mlachila, the IMF’s senior resident representative in South Africa, said no such conditions would be attached under the rapid financing instrument, through which the country could access emergency assistance. Typically, countries seeking assistance would write to the lender’s managing director describing the nature the shock it is facing, its socio-economic impact and how it would use resources from the fund, he said in a phone interview on Tuesday.
“The country also commits to general good economic management and transparency in the utilization of resources,” Mlachila said. While it’s not a blank check, “there is no ex-post conditionality for such a request,” he said.
Such a loan would be payable over over 3.25 to five years and at an interest rate of just over 1%, he said.
The lender sees Africa’s most industrialised economy shrinking by 5.8% in 2020 as measures taken to curb the spread of the virus have halted almost all global economic activity and disrupted trade. The IMF forecasts the country’s budget deficit would widen to 13.3% of gross domestic product, almost double what the National Treasury projected in February. While the pandemic has added to woes of an economy that was stuck in its longest downward cycle since World War II even before the outbreak and which has little room for fiscal stimulus, the government has not approached the Washington-based lender for assistance, Mlachila said. That’s despite the lender mobilising more than $18 billion to help 40 African countries who have approached it.
The fiscal framework presented by the Treasury two months ago has been overtaken by recent events and a new budget that includes revised growth projections is necessary, Mlachila said.
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