The International Monetary Fund has approved $4.3 billion in emergency investments for South Africa, the largest emergency disbursement for a country that has not yet fought the coronavirus pandemic.
The budget “helps the authorities’ efforts to deal with the complicated adequacy scenario and the serious economic consequences of Covid-19’s impact,” the Washington-based lender said Monday. “Once the pandemic has passed, there is an urgent desire to ensure debt sustainability and implement structural reforms to help recovery and achieve sustainable and inclusive growth.”
With more than 445,000 cases of Covid-19 and nearly 7,000 deaths, South Africa is the worst-affected country on the continent. A blockade aimed at closing the hole is ravaging the economy, and the government expects it to contract by 7.2% this year.
Even before the pandemic hit, South Africa got stuck in its longest cycle of decline since World War II and gross domestic product was likely to contract more than 30% in the current quarter, according to central bank forecasts. Public debt is now expected to peak nearly 90% of GDP in 2023-24 and the budget deficit will reach a record this year.
“In the future, our fiscal measures will build on our political strengths and restrict existing economic vulnerabilities that have been exacerbated by the Covid-19 pandemic,” Finance Minister Titus Mboweni said Monday.
The blockade, which began on March 27 and has gradually eased, is affecting production and will further reduce tax revenues that have not met the targets for up to more than five years. President Cyril Ramaphosa announced a 500 billion rand ($29.9 billion) stimulus package in April, and the National Treasury said the government is looking for 7 billion rand from multilateral lenders.
Other loans
The new progression bank has already provided a $1 billion loan, while the country borrows about five billion rand ($300 million) from the African Development Bank. The country will seek up to $2 billion from the World Bank, according to Treasury Director General Dondo Mogajane.
IMF cash comes after senior officials from the ruling African National Congress and its alliance partners first rejected advice that the government was seeking help from multilateral lenders, saying structural changes related to loans would undermine the country’s sovereignty. However, IMF emergency loans to the virus and conditioning interventions are delivered without the general situations that have affected beyond borrowers.
In April, the IMF doubled its emergency lending capacity to $100 billion, and Managing Director Kristalina Georgieva said the fund will mobilize more than $18 billion to meet the demands of more than 40 African countries. The lender has now approved more than $14 billion in emergency funding for mainland countries, adding $3.4 billion for Nigeria and $2.8 billion for Egypt. In the most sensible of that. Last month, the IMF approved a 12-month confirmation agreement of $5.2 billion for Egypt.
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