The International Monetary Fund (IMF) 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.
According to National Treasury, 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,” said National Treasury in a statement.
Treasury director-general Dondo Mogajane said earlier this year that Treasury was looking to raise R95bn from multilateral institutions and development banks.
The funds would reportedly go towards business support, job creation and protection of existing jobs in the current economic climate.
Finance Minister Tito 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 move to approach the IMF has been criticised by the Economic Freedom Fighters, who said in a statement earlier this year that “the IMF and World Bank loans come with restrictive conditionalities, which will deprive South Africa of its fiscal and monetary policy sovereignty in future.”
Mboweni addressed concerns about funding from the International Monetary Fund (IMF) and other international institutions by stating that that the support provided by the IMF and other institutions during this period was specific to Covid-19.