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IMF: No discussions with SA

The lender of last resort says the South African government has not approached it.
The IMF says the country’s resilience should ‘see it through’ for a while, subject to policies ‘being recalibrated’. Image: Andrew Harrer, Bloomberg

South Africa has not approached the International Monetary Fund (IMF) for assistance in dealing with the economic fallout of the Covid-19 crisis.

This is according to Abebe Aemro Selassie, director of the African Department at the IMF.

“There are no discussions on financing with [the] South African government,” he said at a media briefing on the regional economic outlook on sub-Saharan Africa on Wednesday (April 15).

Selassie’s statement follows growing speculation that the government would be forced to approach the IMF for funding, as it shut down the country for five weeks in a bid to slow the spread of the deadly virus.

Pressure

The lockdown puts SA’s fiscal position in further jeopardy as the deficit was projected to grow to 6.8% for the year to end-March 2012 before the crisis.

Despite talk that an IMF bailout was on the cards, Finance Minister Tito Mboweni has insisted that SA would not approach the lender if it had to abide by its usual conditions.

Selassie went on to say that Africa’s most industrialised country has never had issues in sourcing capital.

“You know, South Africa has always had pretty good international capital access. Over and above that though, the country’s, you know, big strength is, of course, the fact that it has very deep and liquid domestic capital markets.

“Relative to most emerging market countries, actually, it generates its financing need for the government largely domestically and [through] its own currencies.

“So that is really a major source of strength that South Africa has.”

Although the economic difficulty the country was going through prior to the crisis was not lost on Selassie, he still thinks it is relatively well-positioned to deal with it. 

“Of course, debt levels have been going up and, you know, the access to international markets right now has been disrupted for a broad suite of countries. But I think the resilience that South Africa has should see it through a while, subject to policies, of course, being recalibrated to take into account medium-term growth and sustainability considerations as soon as this crisis is behind us.”

Virtual meetup

At around the same time Selassie was addressing the media, Mboweni and South African Reserve Bank Governor Lesetja Kganyago were taking part in virtual meetings of the IMF’s advisors, the International Monetary and Financial Committee (IMFC).

In an address to the IMFC’s plenary meeting, Mboweni said that the government has been working through several scenarios to figure out how the lockdown will impact the economy. 

“At this stage, our central scenario is for a deep recession in 2020, followed by a rapid upswing in economic growth.” 

Mboweni made the point that the recovery relies on understanding how the global economy would adjust. 

“We are in constant conversation with the teams at multilateral bodies, domestic and local economists, and of course the South African Reserve Bank. We are also monitoring domestic and global high frequency data to ensure that we understand as well as we can the ongoing evolution of the economy.”

Three weeks into the lockdown, the government is starting to get a sense of where the country is at economically. 

“The forecasts we have been receiving so far vary from the optimistic to the deeply pessimistic. On the relatively optimistic side, the Organisation of Economic Cooperation and Development (OECD) has highlighted that economic growth in South Africa will shrink by less than other emerging markets, in part because South Africa is not a net oil exporter.”

Mboweni also pointed out that these kinds of crises are not new to SA and that it has generally handled them well.

“As a small open economy we regularly experience external shocks. For this reason, we have chosen a flexible exchange rate, and monetary policy that is anchored by an inflation target. 

“This approach has served us well in the past, through many crises, and it is serving us well at present.”

Every crisis is an opportunity

Even so, the scale of this particular crisis has forced the government to make difficult choices: its economic recovery plan, with a clear timeline of a year, includes the consolidation of public entities and the closure of South African Airways (SAA) and SA Express – although no formal announcements have been made in this regard as yet.

Closing the airlines is just a part of the things the government sees as a necessary response to the crisis.

Others include coming up with clear estimates of the additional healthcare costs that will be needed, reprioritising unnecessary expenditure towards healthcare, and assessing the impact of the economic slowdown on revenue projections.

Mboweni said the government would try to stabilise the debt and put in place structural reforms like passing the road accident benefit scheme and the “consolidation of public entities”.

He noted that: “Like I have alluded to in the past, every crisis is an opportunity for us to address our problems and challenges.”

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I often wonder, these goverment officials in charge of our funds at local, provincial and national level : What is the status of their own, household finances ? I’m asking for the simple reason that if you can’t run your own personal finance, then why should we trust you with our taxpayer billions ? When vetting these people for their jobs, perhaps it should include a breakdown of their own spending habits ? Would there still be enough qualifying candidates ? I wonder…

The order of priority is:
Johnny Walker Blue
Car
Hair
Cloathes
House
Bling
…..

Kids education
Paying overdraft

Cloathes? Really?

Don’t forget the mistress or mistresses.

Being a blesser costs money.

As it happens, their household finance is exceptional. No doubt their income is far more than they earn thanks to the looting mechanisms and corruption place.

I am aware of people able to get “tax breaks” through SARS, “essential services” certificates for travel in lockdown, financial support and UIF during lockdown despite being on retainers with govt departments, etc.

Obviously all in the spirit of ubuntu within the ANC.

Your civic duty and responsibility to taxpayers would be to report these transgressions that you are aware of.

I agree with Bill75, “Your civic duty and responsibility to taxpayers would be to report these transgressions that you are aware of.”

And the World Bank? The World Bank has an even larger range of financial tools than the IMF, including grants, concessional loans and even equity investments in infrastructure and private companies. Even Minister Tito Mboweni expressed a preference for immediate World Bank support for Covid-19 healthcare expenditure over IMF assistance, arguing that “we do not (yet, at least) need IMF support”. However, there is a lot of political posturing and face saving behind these comments. So the ANC can play for time and try to save face, but the inevitable reality is that our “twin deficits” i.e. a budget deficit and a chronic current-account deficit will force them cap in hand to either the IMF or World Bank or to both. In just 25 years the ANC has bankrupted this country.

The self belief of our present leaders is astounding. It is getting to a point where I don’t know what will shock them to reality. We are not the most industrialised African country any more. We are not the most developed African country any more. Our currency is not that popular. We are not that productive. General unemployment is terrible. But still they are on a financial course of self destruction.

South Africa does not need assistance from either the IMF or the World Bank. The socialist ANC needs it. It is the ANC that is in desperate need for someone to keep on funding their looting spree. Luthuli House is a bunch of highwaymen who has been laying ambushes for local and foreign investors for a quarter of a century. This is how they fund their vote-buying endeavours. The ANC is a loose affiliation of bandits and looters who fight each other for the opportunity to make laws to legalise plunder.

The ANC’s badly camouflaged ambush is built with the following laws and structures. The Mining Charter, BEE laws, SOE monopolies, the redistributive municipal rates and taxes regime, the security of tenure laws, the Nationalisation of Mineral Rights, the Labour Laws, the minimum wage, the Tripartite Alliance, local beneficiation requirements, the high company tax, the high tax rate for individuals, taxes on capital formation and estate duties. You enter the ambush as an exited patriotic investor with good intentions, and you exit the ambush bruised and battered, without capital and painted as a WMC.

The IMF simply is not willing to enter the ambush, that is all. The prerequisites of the IMF, that the ANC protest against, requires the abolishing of the ambush. The IMF can identify the ambush because they have seen it in many parts of the world. Socialists run out of other people’s money and then, fearing that they will lose their salaries, they run to the IMF. The IMF is not that stupid.

The IMF will only touch the ANC after the ANC has ripped its own heart out, wrapped it in the Freedom Charter and thrown it in a pit toilet in rural KwaZulu-Natal. It is time to treat your investors with some respect guys. If you want jobs and food, then embrace the free-market capitalists.

I wonder how much IMF and World Bank money given to the ANC is currently nestled in Dubai.

South Africa has deep access & liquidity in domestic and international markets?

You mean like when the SARB recently printed money to buy bonds on these deep markets because nobody wants to buy them resulting in immediate credit downgrades.

They may soon have no option but to talk to IMF.

End of comments.

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