IMF loan ‘won’t solve all SA’s economic problems’
A economist has warned that the Covid-19 loan by the International Monetary Fund (IMF) won’t solve all South Africa’s economic problems.
On Monday, the IMF approved the R70 billion loan to help it fight the coronavirus pandemic.
Econometrix economist Azar Jammine has welcomed the decision, saying it will go a long way.
“The reason why it’s welcome is not because it will solve all our economic problems but because it was an opportunity to reduce slightly the burden of debt that the government is currently carrying.
“It goes only a partial way in solving our problems,” says Jammine.
Jammine says the loan, which comes with an very low interest rate, is a bargain.
“At least it borrows this money at about 1% interest compared to having to pay between 7 and 11% interest on capital market rates.
“To that effect it will be saving around R6 billion to R7 billion a year by having the money from the IMF than from other sources,” he explains.
At the same time Jammine admits there are some concerns.
“I think those concerns regarding the use of the money for corrupt purposes is a valid one. Hopefully that can be avoided.”
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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.
But not everyone is swayed in favour of the loan.
Economist Duma Gqubule believes no good will come from the intervention.
“There’s no need for South Africa to go to the IMF, we’ve got deep domestic capital markets which can fund this R70 billion easily.”
Not all South Africans are impressed with the government’s decision to borrow money from the IMF.
What is beyond me is that we are very excited about this 70 billion ...so what happened to the initial 500 billion or was this just a ploy of the ANC to make us believe they csn look after us during this daunting period
— MEB (@MEB40122141) July 28, 2020
When that IMF loan gets here pic.twitter.com/JtFoFSgkJP
— The Villager (@Penxenxe) July 27, 2020
ANC Comrades rushing to loot the $4.289 billion funds from IMF. pic.twitter.com/tkMHn7YKJX
— Mfundoyakhe Shezi 🇿🇦 (@Mfundoyakhe_S) July 27, 2020
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.