IMF emergency loan of $4.3billion with 1% interest has no strings attached

Business

Johannesburg – South Africa’s $4.3 billion (R70.9bn) loan from the International Monetary Fund (IMF) has been welcomed, although there are concerns about whether the country will be able to meet the debt obligations.

The IMF on Monday approved the country’s request for emergency financial assistance under the Rapid Financing Instrument.

President Cyril Ramaphosa announced in April that the government would approach international financial institutions, including the IMF, for loans to make up the R500bn economic recovery package.

The loan from the IMF is meant to meet urgent balance of payment needs stemming from the economic impact of the coronavirus pandemic.

Yesterday Old Mutual Wealth’s Izak Odendaal said the IMF could not lend to countries when it deemed debt to be unsustainable, and therefore it was positive for South Africa that the IMF had approved the loan.

He added that the loan should be seen as a positive sign, given that the interest rate on the loan was likely to be in the region of 1% with the extremely high by global standards of about 7.5%.

IMF’s acting chairperson, Geoffrey Okamoto, said there was a pressing need to strengthen economic fundamentals and ensure debt sustainability by carrying out fiscal consolidation.

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