is subsidised by rich members and is available only to the poorest countries – not middle-income countries like South Africa. The RFI is available to every member at a 1.1% interest rate to be repaid over three to five years. Given that five-year government bond yields currently hover above 8%, the RFI comes at a much more concessional rate.
Unlike an IMF loan to avoid credit default, which attaches strict “conditionalities” to public spending reduction and debt stabilisation as a form of collateral, its emergency funding has no enforceable conditionality. It does expect members to commit to sustainable public finances and good governance, but this is not enforceable and is a commitment South Africa has made anyway.
But not at this time: the severe demand shock of the lockdown has almost stopped the normal flow of the economy. Additionally, the depressed oil price is But this point of view is inconsistent with reality. Normally, cutting interest rates — as the Reserve Bank has done twice already and is likely to do again this week — would raise the price of bonds and reduce yields. This hashad the usual effect, as risk-averse investors have deserted emerging markets at unprecedented rates, destroying demand for bonds.
Funding government debt from the market would be prohibitively expensive – creating money is the cheapest way to fund the recovery package.
Do we have economists in our beloved South Africa to advise South Africa not to rush to IMF, World Bank and China for funding and bail outs. We need to correct and fight this pollution.
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SA must pursue fiscal reform to prevent a dire debt trapThe country knows what to do, and should not shy away from approaching the IMF This is rich. They are the ones causing the debt trap. That would include the State have at least 50% stake in Mining Companies.
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