Mboweni slams IMF loan speculation as 'urban legend'

This misunderstanding of the IMF loan as if the biggest devil has arrived in town is quite incorrect," said the minister. (Photo: Gallo /Ziyaad Douglas)
This misunderstanding of the IMF loan as if the biggest devil has arrived in town is quite incorrect," said the minister. (Photo: Gallo /Ziyaad Douglas)
Gallo Images/Ziyaad Douglas

  • Minister of Finance Tito Mboweni says it is an urban legend to suggest that the R500 billion stimulus package has disappeared.
  • Mboweni also took a moment to condemn reports about possible acts of corruption in some of the contracts awarded in respect of Covid-19 treatment.
  • But some opposition MPs appeared unconvinced, with tough questions for the finance minister. 

Minister of Finance Tito Mboweni used his appearance during a virtual parliamentary plenary on Wednesday to quash speculation regarding the $4.3-billion International Monetary Fund loan and its implications for the fiscus, calling this nothing more than "urban legend".

The adjustments appropriation bill debate, which took place on Wednesday morning, came after National Treasury announced on Monday evening that the IMF executive board approved a loan to South Africa to fight the Covid-19 pandemic, which at current exchange rates amounts to around R70 billion.

Almost immediately, the news was met with speculation by politicians and members of Parliament on social media, questioning why South Africa would need to utilise a loan from the IMF when it was already dispensing a stimulus package.

Mboweni used his response to the debate to "emphasise" that the R500-billion stimulus package was composed of different elements, including the R200-billion national loan guarantee scheme, "to keep the oil working on the wheels of the economy".

He added:

"There is an urban legend that the R500-billion package has disappeared. Nothing could be further from the truth. How could R500 billion disappear? There is nothing of the sort. We are working with various entities to give that a better boost."

'Feeding frenzy'

Mboweni also took a moment to condemn reports about possible acts of corruption in some of the contracts awarded in respect of Covid-19 treatment. He said he was in discussions with National Treasury Director-General Dondo Mogajane to see how procedures could be tightened in this regard.

"The feeding frenzy going on now in the country, that every tender and contract that that is issued is equal to corruption, is incorrect. It's incorrect. To assume that a R125-million tender is intended as a gift to somebody else is incorrect," Mboweni said.

The finance minister said government needed to demystify the public's perceptions on the loan facilities South Africa has pursued, including the IMF $4.3 billion at an interest rate of 1%, the New Development Bank emergency facility of $1 billion, the African Development Bank loan of R5 billion and ongoing talks for assistance with the World Bank.

'Biggest devil in town'

"This misunderstanding of the IMF loan as if the biggest devil has arrived in town is quite incorrect. We must understand it within the context of Covid-19 and within the context of the borrowing requirement which we would have had to enter into anyway, either by issuing a global bond or other domestic bonds," he said.

African National Congress MP Sfiso Buthelezi said while unforeseen circumstances made for a season of hard trade-offs, government has done its best to balance limited financial resources from non-essential and non-performing items, and to redirect them to the emergency of the pandemic.

"Honourable members, the budget which the minister of finance tabled in February had to be changed. Government is showing its elasticity by mobilising all resources to face the enemy which is invading our country and the world," said Buthelezi.

Democratic Alliance MP Geordin Hill-Lewis said South Africans were witnessing the unravelling of the South African economy with millions of South Africans losing their jobs and that the lockdown needed to be ended as "jobs save lives".

'We'll be back at the IMF soon'

"Tens of thousands of businesses are closing or are closed. South Africans are facing real danger and the anxiety of financial ruin is leading many to take their lives," said Hill-Lewis, noting as an example Kagiso Boroko, the opera tenor who took his own life on Tuesday evening.

Hill-Lewis urged government to stop capitulating on "line-in-the-sand decisions" like ending non-stop financial lifelines to South African Airways, or else government’s decline over the fiscal cliff will continue and "we will be back at the IMF again soon".

Economic Freedom Fighters MP Floyd Shivambu said the only legend and falsehood was the "imaginary R500 billion" which he charged was comprised of tax deferments and loans designed to trap South Africa.

"We know that the letter signed by the minister of finance and the Reserve Bank governor committed government to neoliberal policies," said Shivambu.

Inkatha Freedom Party MP Mkhuleko Hlengwa said: 

"Desperate times call for desperate measures and that is where we find ourselves now."
He added: "If we had done the right things before this situation, we would have been better positioned to manage the crisis that Covid-19 has beset on us as a country."

Freedom Front Plus MP Pieter Groenewald evoked the words of former United Kingdom prime minister Winston Churchill, saying the difference between war and politics is that in war one is killed once while in politics one can get killed many times.

"How many more times will we see the finance minister killed before the ANC listens to him?" Groenewald asked.

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