SA commits $2 billion for IMF ‘firewall’

2012-06-19 09:00

South Africa has committed $2 billion dollars (about R16.58 billion) to an International Monetary Fund (IMF) “firewall” meant to prevent future financial crises.

President Jacob Zuma committed some of South Africa’s reserves at the G20 summit, a meeting of the world’s greatest economies, in Los Cabos, Mexico, Treasury spokesperson Jabulani Sikhakhane said today.

“The funds used for this purpose would be considered part of South Africa’s foreign reserves,” he said.

“They will be drawn down only if they are needed and only after other resources have been depleted. The funds will be invested and earn interest.”

Participating countries with no way out of a financial crisis would access the so-called firewall fund through a temporary loan, with conditions, and not purchase agreements to the IMF’s general resources account.

Sikhakhane said the commitment of funds was on the premise that South Africa’s voting power and quota shares in the IMF were reformed, as agreed to in 2010.

Presidency spokesperson Mac Maharaj, speaking from Mexico, said Brazil, Russia, India, China and South Africa were set to release a joint statement of their expectations.

China had committed to $43 billion, while Brazil, India and Russia had offered $10 billion each.

At the G20 summit in Cannes last year, world leaders agreed to increase the resources of the IMF as a backstop in the event of further deterioration in the Eurozone situation.

It was hoped the emergency reserves would stave off the risk of another financial crisis, which would likely lead to a sharp decrease in global growth and rising unemployment.

G20 countries and other IMF members agreed in April this year to commit $430 billion to the special fund, which would be available to all IMF members and not earmarked for a certain region.

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