IMF approves $4.3 billion emergency loan to South Africa

JOHANNESBURG, South Africa

The International Monetary Fund's executive board has agreed to extend a $4.3 billion (R70 billion) loan to support South Africa's response to the impacts of Covid-19 on the economy.

The decision comes after months of engagement between Treasury and IMF management, and it is part of R95 billion being sought from multilateral institutions to support job creation, protection and businesses negatively impacted by the Covid-19 pandemic. These loans are accounted for in government's R500 billion stimulus package to support the economy.

So far both the New Development Bank and the African Development Bank have agreed to loans of $1 billion and R5 billion respectively.

"The Executive Board of the International Monetary Fund (IMF) today approved South Africa's request for emergency financial assistance," the IMF said in a statement issued on Monday evening.

Geoffrey Okamoto, First Deputy Managing Director and Chair of the IMF, noted that SA authorities responded "swiftly" to the crisis. The IMF said that SA had committed to manage the emergency financial assistance with "full transparency and accountability".

This IMF loan has been issued through a "rapid financing instrument" and is not subject to stringent conditions such as structural reforms associated with other IMF lending facilities. 

Treasury has been working out repayment terms of the loan with the IMF, Finance Minister Tito Mboweni previously explained at a press briefing following the tabling of the supplementary budget in June.

"The additional IMF funding is a low interest loan that contributes to government's fiscal relief package while respecting South Africa’s decisions on how best to provide relief to the economy and those worst affected by the current crisis," Treasury said in a statement.

"The country has been hard hit by the pandemic, and this required government to come up with fiscal and monetary measures that would respond to the struggling economy and contain its negative effects to society."

Commenting broadly on the R500 billion stimulus package, Mboweni said it is "one of the largest economic response packages in the developing world". "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," he added. - News24