Get more Mail & Guardian
Subscribe or Login

IMF talks are yet to begin

South Africa has not begun any discussions with the International Monetary Fund (IMF) for emergency funding. The country is grappling with the health and economic blow dealt by Covid-19.

The IMF’s senior resident representative in South Africa, Montfort Mlachila, said the country has not made a request for funding.

Earlier this week, Finance Minister Tito Mboweni said the country would consider various funding avenues, including local and global finance institutions such as the IMF, the African Development Bank, the World Bank and the New Development Bank (formerly the Brics bank).

Mboweni stressed that any funding request would not support budget items but rather “Covid-19 specific packages”. Mboweni, and the ANC, have been loath to approach lending institutions that might demand harsh terms for their loans.

Mboweni reiterated: “We are looking at programmes that will not be accompanied by any structural adjustment programmes.” Those adjustment programmes are some of the main conditions for loans from the IMF, where it demands changes in how an economy works in return for its money.

Under the IMF’s Rapid Financing Instrument (RFI), countries are eligible for aid to deal with natural disasters. Last week the IMF executive board announced that the emergency lending facility would be doubled to $100-billion to meet the expected demand. The emergency funding is not subject to traditional conditions by the IMF; there is virtually no conditionally and all the money is available upfront.

Mlachila said the RFI is available for South Africa should the country require it but that it’s up to the government to decide what funding is most appropriate as it deals with the pandemic.

The country’s economy was in recession before the coronavirus outbreak and the pandemic will result in further contraction of the country’s gross domestic product (GDP). This week the South African Reserve Bank said it expects the country’s GDP to contract in 2020 by 6.1%, compared with the -0.2% estimated just three weeks ago when the bank’s Monetary Policy Committee last met.

The GDP is then expected to grow by 2.2% in 2021 and by 2.7% in 2022.

(John McCann/M&G)

The IMF estimates a -5.8% contraction in the country’s GDP in 2020 and a 4.0% recovery in 2021. The steep contraction is in line with the IMF’s projections for the Sub-Saharan region, which is expected to contract by 1.6% this year.

Governments in the region are seeing their economy being ravaged by the pandemic and have turned to the IMF for support. This week the

IMF approved immediate debt service relief to 25 countries, 19 of them in Sub-Saharan Africa. This debt relief programme provides grants to the poorest nations to cover their debt obligations to the IMF for an initial phase over the next six months.

This week saw Ghana and Senegal being approved for the disbursement of $1-billion and $442-million respectively under the IMF’s Rapid Credit Facility and the Rapid Financing Instrument.

“This is unprecedented in IMF history to have so many countries ask for financial assistance at the same time and IMF has to make sure that requests are addressed,” Mlachila said.

Globally more than 90 countries have approached the IMF for emergency funding as the pandemic rips through economies. The lending institution projects global growth in 2020 to fall to -3%, revised from 6.3% in from January.

Assuming that the various policy and virus containment measures by governments are successful and the pandemic fades by the second half of the year, the IMF expects global growth in 2021 to rebound to 5.8% in 2021.

Thando Maeko is an Adamela Trust business reporter at the Mail & Guardian

Subscribe to the M&G

Thanks for enjoying the Mail & Guardian, we’re proud of our 36 year history, throughout which we have delivered to readers the most important, unbiased stories in South Africa. Good journalism costs, though, and right from our very first edition we’ve relied on reader subscriptions to protect our independence.

Digital subscribers get access to all of our award-winning journalism, including premium features, as well as exclusive events, newsletters, webinars and the cryptic crossword. Click here to find out how to join them and receive a 40% discount on our annual rate..

Thando Maeko
Thando Maeko is an Adamela Trust business reporter at the Mail & Guardian

Related stories

Advertising

Subscribers only

Seven years’ radio silence for taxpayer-funded Rhythm FM

Almost R50-million of taxpayers’ money has been invested but the station is yet to broadcast a single show

Q&A Sessions: Zanele Mbuyisa — For the love of people-centred...

She’s worked on one of the biggest class-action cases in South Africa and she’s taken on Uber: Zanele Mbuyisa speaks to Athandiwe Saba about advocating for the underrepresented, getting ‘old’ and transformation in the law fraternity

More top stories

Magashule defies suspension order and KZN leaders’ advice that he...

A strategy by the KwaZulu-Natal ANC to control the narrative coming out of former president Zuma’s court appearance for arms deal corruption and fraud was thwarted

Landmark Deadly Air case: 10 000 deaths annually can be...

There is no legal mechanism in place to implement and enforce measures to prevent toxic air pollution in the Highveld

No masks. No Covid. But problems do abound

With no cases of Covid-19, a Zimbabwe informal settlement’s residents are more concerned about making ends meet – and their imminent eviction

Cameroon’s democratic repositioning: Is the republic now a de facto...

Franck Biya, a Cameroonian businessman is also the son of President Paul Biya. Does this mean he will be president, too?
Advertising

press releases

Loading latest Press Releases…
×