Finance Minister Enoch Godongwana has defended the government’s decision to accept a R11 billion loan from the World Bank saying it is necessary.
He was briefing Parliament’s Standing Committee on Finance. This is after the committee requested him to give a detailed explanation on the rationale behind the loan, conditions attached to it, and its implications on the fiscus which is under pressure.
Godongwana explains how the loan will be used.
“It’s necessary because we’ve got to make sure that the expenditure, which some of it is related to current expenditure, some of it is going to debt service cost, some of it is going to redemptions, so we are raising money. It’s a necessary thing government does on an annual basis.”
Godongwana says the World Bank government needs to raise R630 billion. “The World Bank’s R11billion loan is part of this. We are raising this money from various sources, including Development Finance Institutions such as the New Development Bank and others, not just the World Bank.”
Godongwana says the World Bank has a cheaper interest rate. “The bank also gave us a repayment holiday of three years on the loan. So that is the rationale behind taking this loan.”
The loan will also go towards supporting the government’s efforts to accelerate its COVID-19 response:
