The National Treasury has outlined its plans for the over R11 billion loan that the World Bank approved for South Africa.
This loan is intended to support government’s efforts to accelerate its COVID-19 response aimed at protecting the poor and vulnerable from the impact of the pandemic.
Director-General at the National Treasury, Dondo Mogajane says, “What we said we will do because it is in dollars, we will just keep it as a buffer because we have to have some reserves during dry times to make sure that when we need it – from a cash management and flow point of view – at the right time we will convert it. But for now, we will keep it. We are not about to compromise the sovereignty of the state. We said that at the time we got the loan from the IMF, we are not going to do that.”
The video below is a report of SA borrowing over R11 billion from the World Bank:
EFF rejects World Bank loan of R11. 5 billion awarded to South Africa
The Economic Freedom Fighters (EFF) says that it rejects the World Bank loan of R11. 5 billion awarded to South Africa.
However, EFF Secretary-General Marshall Dlamini says this forms part of a programme to sell off the country piece by piece.
“As the EFF, we reject that money from the IMF and we have said that that there are other means and ways of raising money in South Africa before we rush to those who are going to colonise and take over the country. You could see even that announcement by [President] Cyril [Ramaphosa] that we should start reducing coal production, you can see where it is funded from because we have enough coal in this country to ensure that we develop this country. It’s a cheaper source of energy in this county but already those that are taking money from the IMF, they have already started working on this situation so you can see it’s a ploy of colonising this country.”
Previous loans received
Since the COVID-19 pandemic began, South Africa has received several loans as part of government’s broader financing strategy to access external financing from international financial institutions.
- In July 2020, South Africa received $288 million (the equivalent of R5 billion at then exchange rate) from African Development Bank.
- Also, in July 2020 South Africa received $4.3 billion (equivalent of R70 billion at then exchange rate).
- In April 2021, South Africa received $1 billion (equivalent of R14.5 billion at then current exchange rates) from New Development Bank also known as BRICS Bank.
South Africa’s rising Debt to GDP
While these loans currently bring fiscal relief to government’s fiscal, it is a burden for the future. South Africa’s Debt to GDP is currently at 69.9% of GDP (R4.3 trillion) and the National Treasury projected that for 2022/23 fiscal year the Debt to GDP will increase to 74.7% (R4 744.7 billion). Meanwhile, Debt-Service Cost is the fastest-growing spending item as per projections of the National Treasury.
- R303.1 billion for 2022/23
- R334.4 billion for 2023/24
- R365.8 billion for 2024/25 (This is higher than the health and police services budgets)
This leads to debt service costs to be estimated at R1 trillion over the medium term and is highlighting the impact of South Africa’s rising debt stock.
In the video below from October last year, the International Monetary Fund says South Africa is expected to have an improved economic outlook: