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IMF approves $4.3bn loan for SA to address Covid-19 challenges

A rapid financing instrument is a low-cost loan to IMF member countries needing emergency assistance, without needing a fully-fledged programme in place.
IMF says specific reform commitments in October's Medium-Term Budget Policy Statement will be critical. Image: Shutterstock

The International Monetary Fund (IMF) has approved South Africa’s rapid financing instrument (RFI) to the tune of $4.3 billion, that will be directed towards financing needs arising from the Covid-19 pandemic. 

The loan, which converts to just over R70 billion, comes after South Africa received similar Covid-19 facilities from the New Development Bank ($1 billion) and the African Development Bank ($288 million).

The loans will go towards a range of social and economic initiatives which include supporting health and frontline services, protecting the most vulnerable, job creation, economic growth through reforms and stabilising public debt. 

Long-standing reforms 

In a statement released on Monday evening, the IMF acknowledged that the South African economy was already significantly weak when Covid-19 hit, interrupting domestic economic activity and global supply chains. Now the deterioration has put in motion the development of “a deep economic recession”. 

“The RFI will help fill the urgent BOP [balance of payments] need originating from the fiscal pressures posed by the pandemic, limit regional spillovers, and catalyse additional financing from other international financial institutions,” it said.

“It will complement the authorities’ strong policy response to the crisis and their planned post-Covid-19 fiscal consolidation and reforms to promote growth that benefits all South Africans.”

The RFI is a low-cost loan provided to all member countries of the IMF that need emergency assistance without the need to have a fully-fledged programme in place. 

However, the IMF did note that the government has to stabilise public debt through fiscal consolidation, improve governance and the operations of state-owned entities and implement growth-enhancing reforms. 

“The Covid-19 crisis heightens the urgency of implementing these efforts to achieve sustainable and inclusive growth,” said the IMF’s first deputy managing director and chair Geoffrey Okamoto. 

“Specific reform commitments at the time of the October Medium-Term Budget Policy Statement will be a critical step to buttress the credibility of the reform efforts and should be followed by steadfast implementation,” said Okamoto.

Support package

Finance Minister Tito Mboweni said the loan will contribute to government’s R500 billion fiscal relief package that was presented in the supplementary budget in June. 

“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,” said Mboweni. 

The package is made up of a wide range of interventions that are not limited to financial support alone, including a R200 billion loan guarantee scheme for small business, tax measures and wage protection through the Unemployment Insurance Fund. 

“Going forward, our fiscal measures will build on our policy strengths and limit the existing economic vulnerabilities which have been exacerbated by the Covid-19 pandemic,” said Mboweni. 

Transparency 

The IMF loan comes as President Cyril Ramaphosa has announced the government’s tough response to the mismanagement of funds and tender corruption related to Covid-19 procurement. 

The IMF said government has committed to “transparently monitor and report all use of emergency funds” as a critical mechanism to ensure that the money is used for what it is intended.

In a nationwide address on Thursday, Ramaphosa announced that the Special Investigating Unit (SIU) would investigate irregular and unlawful activity related to the procurement of goods or services related to the national state of disaster in state institutions. 

One such case involves Ramaphosa’s spokesperson Khusela Diko and her husband AmaBhaca king, Madzikane II Thandisizwe Diko. 

On Monday Diko announced that she would be stepping down as Ramaphosa’s spokesperson “pending investigations on recent allegations involving her and her husband in tender irregularities in the Gauteng Department of Health.”

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Oh yay! More debt we cant repay.

Can we start the countdown to default clock?

Ready, steady…….LOOT!!!

Yip. @Daviddebeer when you say ‘we’ can’t repay the loan you mean our bANCrupt govment. ‘We’ the taxpayers will have to repay the looted loan…

@experienced. The SA taxpayer will pay, or the retirement/pension funds will pay through prescribed assets.

Maybe the word “pay” could sound too harsh to approach pension funds/prescribed assets. Instead, more palatable sounding words will be used like ‘contribute’, ‘participate constructively’, ‘invest for social benefits’ etc)

Only the ones that stick around in SA.

Filling up the cookie jar..
ready for more coronavirus tenders.

Wet dreams all round at Lootfreely house.

Mmmm the IMF’s first foray in stocking the ATM.

Going to look like pension day the moment it arrives.

In 6 months time another commission of inquiry into the evaporating dosh.

Same old same old, we have seen it all before. INF will be gobsmacked at the speed it goes.

Yaaaa. CR and his troops have lost all respect because of their looting.

They are under the impression that “dignity” is a human right and cant be taken away fro you.

Well if you squander it yourself being a thief its gone. FOREVER. Same if it happens under your watch and you look the other way.

Look at the bright side. At least the luxury goods sector will recover from the pandemic quickly.

Agreed and so will the expensive funeral and bling business boom.

Now the question is will the ANC government actually be fiscally conservative after the pandemic and try and reduce debt levels over the medium to long term? Probably they will try and spend the country out of economic oblivion (while also taking a huge chunk of the cash as a “fee”).

One thing many people do not understand about infrastructure spending is the infrastructure being built as to be economically productive. In other words building housing only helps the builders and building material producers in the short term, but actually has no economic productivity once built.

Of all the infrastructure spending I have read about over the last couple of weeks a minority can be economically productive once built (although the government would most probably find a way to get these unproductive).

If the ANC actually wanted to grow the economy and create employment they should start at:
1. Stopping EWC
2. Abolishing BEE
3. Deporting unskilled migrants and ecuring the borders
4. Privatizing SOEs (the proceeds of which can actually help in reducing governemnt debt levels)
5. Relaxing labour laws
6. Actually tackle corruption and send the culprits to jail
7. Re-professionalizing municipalities (also professionalizing state departmens while at it), while reducing the state wage bill.

I mean there are more obvious things they can do that I did not list above, but the ANC has not even attempted any of these and has in fact doubled down on their socialist policies. This means the economy WILL NOT recover and WILL deteriorate further with the state having no capacity to stop the humanitarian crisis that will unfold.

4 & 5 Can’t got hand in hand n aren’t that easily attainable.

@The Banana Republican. I share your (realistic) view to a tee.

While you mention infrastructure spending, future funding could come in the form of a softer approach to ‘prescribed assets’ on Pension Funds. The question is, if ret funds owned part of a social project they ‘invest’ in, how would they recover returns?, as there’s no direct fees involved in most social projects. Goes to state or munis.

(Irrespective if it’s a hard/forced prescribed assets one day, or a change to Reg 28, in the end, money into a bottomless pit effect will be the same)

Wish the IMF would send their best financial & operational SWAT team at the same time, preferably in addition to the USD4.3 billion, but in place of some of the RFI will do as well.

SA may be short of funds, but the state’s capacity across all three tiers of government is not ‘short’, it is non-existent.

Further appeal to the IMF: said SWAT team need to come with lie-detectors.

Jesus said he was busy

Watching this farce is like going to a movie where you know the exact outcome. Sticky fingers at the ready.

I wonder what conditions/requirements this IMF loan will entail?

Fresh out of the oven Zerohedge article :

World Bank/IMF Exposed: COVID Aid Conditional On Imposing Extreme Lockdowns, Curfews

The IMF also assisted Robert Mugabe at some stage. That was before the government employees threatened to vote for the opposition if they do not get salary increases and larger pension payouts. Ramaphosa’s irregular and unscientific decisions to close the schools recently proves the point.

Everything will run smoothly and we will implement the proposals, or prerequisites actually, of the IMF until the ANC risks losing the next election. Then, the ANC will follow Mugabe’s example, and show the middle finger to the IMF and print the money to fund BEE schemes, cadre-deployment, SOE guarantees, bankrupt municipalities and social grants.

The stabilising effect of IMF assistance offers only temporary relief from the corrosive effect that the mindset of the average voter has on economic growth. The IMF loan will disappear into the void of the communalist mindset.

Great minds think alike 🙂

ZAR70bn ready for ‘transformation’, AA, BEE, cadre-deploment, looting.

On the other hand, let’s welcome it….rather than the IMF not getting their capital back one day, instead of one’s retirement/pension fund. It delays the inevitable.

Massive increase in taxi-industry bailout coming. A dream to be a non-tax-paying, lawless thug in South Africa!

Everyone immediately thinks: “How much will the ANC cadres steal?”

Well, just relax. They don’t have to steal a cent. They will take their percentages in commissions on disbursements and “consultations” like the rest of the finance industry and on R70 billion, start thinking new Mercs and that apartment in Clifton.

How else do you think traders and finance managers in London, Hong Kong and New York can afford Moet & Chandon every night at the best restaurants?

Trudy Makhanya should be fired with immediate effect. She has no idea about what she is doing.

Agree! her thinking is poor.

Look at what happened when she was at the competition commission. … And when things hit the fan… she left together with Simon Roberts and gang …. they took the Competition commission for a ride.

Simon Roberts useless analysis has resulted in poor decisions made.

Why not get back the Billions from the Guptas living like Kings in Dubai
What facinates me is how so much money left the RSA without the Reserve Bank knowing about it?
I wonder how many pay-offs were maid to achieve this?
Now that the Loan has been approved, i wonder who will be the 1st to put the hands in the till and i assume by the weekend the money will be gone!

Trust me there’s nothing left of it – lets wait for another investigation followed by the inquiry

Its time for a tax revolt, period

Simple , let me assume Tito and Pravin have suddenly found the CASH for SAA?

End of comments.

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