IMF loan ‘cheaper option’ for govt, says Mogajane
National Treasury director-general Dondo Mogajane says the multi-billion rand loan by the International Monetary Fund (IMF) was the “cheaper option” for the government.
The IMF board on Monday approved the R70 billion support package to help the country weather the economic storm brought about by the Covid-19 pandemic.
The loan comes with an interest rate of around 1% and much less stringent condition than the IMF usually attaches to its financing.
Mogajane told Jacaranda FM News in an interview on Wednesday that raising the money in the local capital market would have come at a higher cost.
“At this point in time the IMF money was cheaper and the IMF was much cheaper than we thought.
“We had a choice of raising the money from the normal capital market, which we could have done, but it would have come at a high cost. Our debt servicing cost and our debt was going to increase,” he said.
The relief package is meant to be spent on health, job creation and protecting the most vulnerable.
The 1% interest on the loan is expected to cost the country some $43 million.
“That is why we say that 1% in any language is very cheap. One percent is $43 million dollars compared to what we would’ve paid in the capital market,” said Mogajane.