The IMF executive board has approved South Africa’s request for emergency financial support under the Rapid Financing Instrument (RFI) for an amount of US$4.3 billion to help the country mitigate the adverse social and economic impact of the COVID-19 pandemic.
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. It will also pave the way for government to provide the necessary financial relief required to forge a new economy and mitigate further harm to the economy.
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.
Minister of Finance, Tito Mboweni, presented a Special Adjustments Budget in Parliament on 24 June 2020 as part of government’s key interventions to the COVID-19 pandemic.
Public spending priorities and budgets are being re-ordered and reprioritised towards COVID-19 related interventions and economic recovery efforts. The relief package will:
- Support health and frontline services;
- Protect the most vulnerable;
- Drive job creation;
- Unlock economic growth through reforms; and
- Stabilise public debt.
Following the executive board’s decision, Mboweni said: “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. The South African Reserve Bank has reduced interest rates and made it easier for banks to lend money, and supported liquidity in the domestic bond market. Government spending and tax proposals, as well as the loan guarantee scheme and wage protection measures, are providing protection to workers and the poor, while assisting to stay afloat during these tough economic times. 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.”
The IMF has agreed to extend a $4.3 billion loan to help SA’s efforts to fight the Covid-19 pandemic.
This follows months of engagements between Treasury and the IMF’s management to iron out engagement terms.
The New Development Bank and African Development Bank have also both approved Covid-19 relief loans for SA.
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 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.
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 statement issued on Monday evening.
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.