Finance Minister Tito Mboweni has reacted to the IMF’s decision to grant South Africa a low interest COVID-19 loan of $ 4.3 Billion by saying the Ramaphosa administration will continue with measures to build on policy strengths and work to lessen economic vulnerabilities exposed by the virus.
The low interest loan is worth around R70 billion. In total, South Africa has secured financial assistance of more than R 90 billion from international financial institutions.
Mboweni says South Africa’s Reserve Bank has also played an important role in reducing interest rates by a total of 300 basis points as consumers and businesses feel the severe economic effects of the coronavirus lockdown.
He says government’s COVID-19 support package totalling R500 billion has been directed straight at the problems exposed by the coronavirus.
In the video below, Minister Mboweni explains the funding from IMF:
Low interest rates
According to the IMF, under its rapid financing instrument due to the COVID-19 pandemic, South Africa was able to access the financing at very low interest rates relative to the higher borrowing costs the country would generally face.
This is the first time Pretoria has sought a loan from the IMF since democracy in 1994.
According to Bloomberg, under the special drawing rights with the IMF, the loan would be payable over three to five years at an interest rate of just over 1%.
More than 70 countries have received financial assistance from the IMF to help in efforts to cushion the impact of the COVID-19 pandemic.
‘Exhaust all internal avenues’
In April, Economic Freedom Fighters leader, Julius Malema had called on government to first exhaust all internal avenues to help save the country from the negative economic impact of the coronavirus before requesting for funding from the International Monetary Fund and the World Bank.
In the video below Malema addresses the media:
Last week, the African Development Bank approved a $ 288 Million loan to South Africa as part of its COVID-19 response facility while the New Development Bank approved a $ 1 Billion loan as part of its COVID-19 Emergency Programme.