September 28, 2022
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Mboweni on IMF loan of 70 billion rand to South Africa

By on March 23, 2021 0

Finance Minister Tito Mboweni said the International Monetary Fund (IMF) loan to South Africa will not be “specifically earmarked for the payment of salaries”.

Responding in a written parliamentary Q&A, the finance minister said the loan is a special facility created for member countries in emergency situations.

“It’s called a Rapid Financing Instrument (RFI) and does not have any conditionalities, nor does it require the implementation of a structural IMF program,” he said.

“However, countries that receive emergency financing from the IMF are committed to transparent use and reporting of expenditures. Thus, the receipts (or disbursements) of the loans will become part of the National Revenue Fund and will be used to support existing government programs, which could include the payment of salaries.

Mboweni said access to the RFI has been specifically expanded to help countries deal with balance of payments (BOP) issues resulting from the Covid-19 pandemic.

He said the loan offered South Africa a low-interest opportunity to provide countercyclical support to the economy and fund emergency Covid-19 relief.

“In other words, it has mitigated the need for massive spending cuts in response to severe declines in government revenue and averted an explosion in financing needs caused by high-cost borrowing,” he said. .

“Reporting on the use of the loan will be part of the government’s overall responsibility to publish all information relating to Covid-19 related support programmes, including purchases.”

Ready

The IMF has approved a request from South Africa for emergency financial support under the Rapid Financing Instrument (RFI) in the amount of $4.3 billion (R70.6 billion) in July 2020.

The IMF has previously said it will not impose any terms beyond what is in South African law on how the funds can be used.

This means that the funds will be subject to the same procurement and accounting requirements as all other budget expenditures.

In addition, the government will have to account in its future budget statements and reports to parliament on how the funds have been used.

South Africans will also be able to demand that the government demonstrate that the funds have been spent in accordance with the requirements of the constitution and the bill of rights.

This means that the government must show that it is using the maximum available resources, whatever the source, to help realize all the rights that the constitution and South Africa’s international commitments grant to South Africans. .

The IMF requires South Africa to repay the funds to the IMF over 20 months starting 40 months after loan disbursement.


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