R70 billion IMF loan won’t compromise SA’s fiscal sovereignty, says Tito Mboweni

play article
Subscribers can listen to this article
Finance Minister Tito Mboweni.
Finance Minister Tito Mboweni.
Jaco Marais
  • A R70-billion International Monetary Fund (IMF) loan won’t compromise South Africa’s fiscal sovereignty, according to Finance Minister Tito Mboweni.
  • In July, the IMF granted South Africa the loan that was part of R95 billion sought from multilateral institutions.
  • Mboweni said the loan supported the spending plans in the June 2020 special adjustments budget.

South Africa's R70 billion loan from the International Monetary Fund (IMF) was not subject to conditionalities that compromised its fiscal sovereignty.

According to Finance Minister Tito Mboweni, government is obligated to provide broad spending reports to the IMF.

This, Mboweni said, is in line with the requirements of the Public Finance Management Act.

In July, the IMF granted South Africa the US$4.3-billion (around R70 billion) loan, which was part of R95 billion being sought from multilateral institutions to support job creation and protection for businesses negatively impacted by the Covid-19 pandemic.

In response to a written parliamentary question from DA MP Haseena Ismail, Mboweni said the loan supported the spending plans in the June 2020 special adjustments budget, along with other sources of borrowing.

"At the time of the special adjustments budget, the total planned borrowings amounted to R776.9 billion. This was revised substantially down to R670.3 billion at the time of the 2021 budget, with the IMF loan being around R75 billion of this. South Africa will repay the loan over a maximum five-year period as stipulated in the letter of intent (LOI)," he said.

Mboweni said the loan is part of the overall pool of government borrowings.

"At the time of finalising the arrangement with the IMF, there was no credible information internationally on a widely-available vaccine, and this was not the intended purpose of the loan. Following the development of a vaccine, the government has made allocations for a full-vaccination programme over the medium-term expenditure framework [MTEF]. The spending ceiling was lifted in 2021/22 mainly for the vaccine, meaning that borrowings are in part directed towards the vaccine," he said.

Last year, the SA Communist Party (SACP) said it was not happy about IMF’s billion loan to the country.

SACP general secretary Blade Nzimande said the loan exposes the economy to imperialists.

Nzimande, also Higher Education, Science and Technology Minister, described the loan as a grievous mistake.

But Mboweni said the loan was a rapid financing instrument (RFI) facility, which was a temporary arrangement by the IMF for its member countries in response to the Covid-19 outbreak.

"It is a loan that provides rapid and low-access (including low-interest) financial assistance to member countries facing an urgent balance of payments need, without having to agree to a full-fledged IMF structural adjustment program. It provides support to meet a broad range of urgent needs, including those arising from commodity price shocks, natural disasters, conflict and post-conflict situations, and emergencies resulting from fragility. South Africa applied for the loan in the context of an unprecedented fall in government revenues, coupled with a spike in borrowing costs in the market," he said.

Mboweni also said the loan is meant to implement a "counter-cyclical fiscal policy", by avoiding a dramatic and damaging reduction in government spending in response to a fall in tax revenues due to the pandemic.

According to Mboweni, it also financed a sizeable portion of the government’s Covid-19 relief package. 

We live in a world where facts and fiction get blurred
In times of uncertainty you need journalism you can trust. For only R75 per month, you have access to a world of in-depth analyses, investigative journalism, top opinions and a range of features. Journalism strengthens democracy. Invest in the future today.
Subscribe to News24
Rand - Dollar
Rand - Pound
Rand - Euro
Rand - Aus dollar
Rand - Yen
Brent Crude
Top 40
All Share
Resource 10
Industrial 25
Financial 15
All JSE data delayed by at least 15 minutes Iress logo
Company Snapshot
Voting Booth
In light of the recent looting, do you think a basic income grant is the right approach to deal with SA’s hunger and poverty problems?
Please select an option Oops! Something went wrong, please try again later.
It will go a long way in helping fight the symptoms of SA’s entrenched inequality, especially for those who are starving right now
20% - 1492 votes
SA’s problems are complex, and we instead need to spend that money on building and growing our economy, which will help the country in the long run
31% - 2307 votes
All grants are a problem as they foster a reliance on handouts
49% - 3649 votes