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Here's what you need to know about the R70 billion IMF loan to SA

28 July 2020 8:25 AM
Tags:
Economy
South Africa
IMF
Lockdown
COVID-19
imf loan

Economist Sifiso Skenjana says IMF rapid credit facility is for low and middle-income countries that are facing an economic shock.

South Africa stands on the edge of an abyss, pushed there by the effects of an economically brutal Covid-19 lockdown.

And President Cyril Ramaphosa has made it clear the country does not have the resources to move back from the brink - which is why it is relying on this R70billion IMF loan, reportedly the largest such loan made.

Sifiso Skenjana, chief economist at IQ Business, speaks to Refilwe Moloto about the country's promised R70billion IMF loan, and other measures the government hopes, will save the country's economy exacerbated by the Covid-19 pandemic and resulting lockdown.

The IMF has got what they call rapid credit facility designed for low and middle-income countries, who have faced some kind of shock into their economic system.

Sifiso Skenjana, Chief economist - IQ Business

He explains that kind of economic 'shock' results in a balance of payments issue where the country is unable to finance itself.

It often also results in a widening of inequality and poverty and the dampening of growth.

Sifiso Skenjana, Chief economist - IQ Business

It is viewed as an outright disbursement directly aimed at creating a number of financial response buffers to these organisations, he says.

$4.7 billion or R70 billion seems a lot, suggests Refilwe. But Skejana says the expected revenue shortfall from the budget was pegged at around R300 billion

In addition, there is money come in from both the African Development Bank and the New Development Bank as well, totalling around R75 billion.

In the context of where our financial positioning is as an economy, it certainly points to the fact that we are materially constrained from a fiscal point and these are financial assistance solutions that we certainly can do with as an economy.

Sifiso Skenjana, Chief economist - IQ Business

He says statements from National Treasury indicate the money will be targeted at poverty eradication.

So it is probably going to go towards partially offsetting some of the grants that are coming in, but also to the health response and probably some portion of it towards trying to boost some economic recovery.

Sifiso Skenjana, Chief economist - IQ Business

Listen to the interview below:


28 July 2020 8:25 AM
Tags:
Economy
South Africa
IMF
Lockdown
COVID-19
imf loan

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