The National Treasury has presented its plans for the loan of more than 11 billion rand that the World Bank has approved for South Africa.
This loan is intended to support the government’s efforts to accelerate its response to COVID-19 aimed at protecting the poor and vulnerable from the impact of the pandemic.
Director General of the National Treasury, Dondo Mogajane, said: “What we said we will do because it is in dollars, we will just keep it as a buffer because we need to have reserves during dry spells to make sure that when we need it – from a management and cash flow point of view – at the right time, we’ll convert it. But for now, we’re going to keep it. We’re not compromising the sovereignty of the state We said the moment we got the IMF loan, we’re 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 attributed to South Africa
The Economic Freedom Fighters (EFF) say they are rejecting the World Bank loan of R11. 5 billion granted to South Africa.
However, EFF General Secretary Marshall Dlamini said it was part of a scheme to sell the country piece by piece.
“As EFF we reject this money from the IMF and we have said that there are other means and ways to raise funds in South Africa before we rush to those who will colonize and take over the country . You could even see this ad 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 make sure that we develop this country. It is a cheaper source of energy in this county but already those who take money from the IMF, they have already started working on this situation, so you can see that it is a ploy to colonize this country .
Previous loans received
Since the onset of the COVID-19 pandemic, South Africa has received several loans as part of the government’s broader financing strategy to access external financing from international financial institutions.
- In July 2020, South Africa received $288 million (equivalent to R5 billion at the exchange rate at the time) from the African Development Bank.
- Additionally, in July 2020, South Africa received $4.3 billion (equivalent to R70 billion at the exchange rate at the time).
- In April 2021, South Africa received $1 billion (equivalent to R14.5 billion at then prevailing exchange rates) from the New Development Bank, also known as BRICS Bank.
South Africa’s growing debt to GDP ratio
Although these loans currently provide tax relief to public finances, they are a burden for the future. South Africa’s debt-to-GDP ratio currently stands at 69.9% of GDP (R4.3 trillion) and the National Treasury projects that for the financial year 2022/23 the debt-to-GDP ratio will rise to 74.7% (R4,744.7 billion). Meanwhile, the cost of servicing debt is the fastest growing expenditure item according to National Treasury projections.
- R303.1 billion for 2022/23
- R334.4 billion for 2023/24
- R365.8 billion for 2024/25 (which is above the health and police service budgets)
This leads to debt servicing costs estimated at R1 trillion over the medium term and highlights the impact of South Africa’s rising debt stock.
In the video below from October last year, the International Monetary Fund indicates that South Africa should have better economic prospects: