The $4.3 billion loan South Africa has received from the International Monetary Fund is unnecessary, with economist, Patrick Bond, charging that the loan conditions could lead to crippling budgetary cuts, which would be detrimental to the poor. A colleague, however, disagrees, saying the loan, which translates to about R70 billion, is much needed but also a test of whether government could be trusted with this kind of money again in future.
Bond has blasted the justification that the emergency financing will help fill the urgent country’s Balance-of-Payments as a result of the pandemic as “totally nonsensical,” saying: “There’s actually not an emergency need for hard currency due to an alleged crisis. To the contrary, South Africa had its first current account surplus in 17 years last month, as imports collapsed due to the economic crisis , as did payments of dividends to foreign firms for their SA operations.
Bond says though the conditions for the loan were unclear, they could potentially impact on budget cuts on municipal services, which could lead to power disconnections because municipalities cannot pay Eskom. “We do need this loan. There is a huge shortfall which is made up of the R500-billion in the Covid-19 rescue package plus, another R300-billion at least in the under recovery of SARS taxes … There is at least R800-billion that has to be found in the short term to cover the Covid-19 relief efforts and to assist the economy in recovery,” he said.
“We have been very good at looting our own money. We now have a loan which has to be repaid … It is possible in the future we could go to the IMF for additional monies if things do not go well in SA. It puts additional responsibility on government to ensure that the rot of corruption is minimised as far as possible when it comes to these additional monies,” Silke says.
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