The International Monetary Fund's headquarters in Washington, DC, the US. Picture: SAUL LOEB / AFP
While the lockdown here was incrementally eased from May 1, it is expected that months of restricted business activity will greatly weaken an already fragile economy, which contracted 1.4% in the last quarter of 2019. A widening budget deficit , increased levels of government borrowing , the ongoing absence of microeconomic reforms and unsustainable state-owned enterprises have all contributed to this.
One question that has not yet been adequately answered is how the proposed $4.2bn facility will be repaid in the period 2023/2025 given SA’s economic trajectory Historically, borrowing under an RFI was limited to 50% of a country’s SDR quota. Higher access limits have, however, been temporarily put in place to accommodate Covid-19 related financing needs, increasing from 50% to 100% of quota per year, and from 100% to 150% of quota on a cumulative basis . SA’s quota is just over SDR3-billion . If SA’s RFI application is granted, $4.2bn would obviously go a long way towards addressing the country’s fiscal gap and the immediate cost of Covid-19.
Unathi_Kwaza Great piece.