IMF South Afric

Headquarters of the International Monetary Fund (IMF) in Washington D.C., the United States

The IMF is confident that South Africa can sort itself out

The International Monetary Fund is of the opininion that South Africa is perfectly capable of sorting out its own problems without a loan.

IMF South Afric

Headquarters of the International Monetary Fund (IMF) in Washington D.C., the United States

The International Monetary Fund’s (IMF) senior representative in South Africa Montfort Mlachila has revealed that South Africa has not approached it for a loan and revealed he believes the country does not need one.

IMF backs South Africa to recover

The South African economy is struggling. Reports of record numbers of unemployed people have followed the IMF themselves slashing its gross domestic product growth forecasts for the nation.

However, according to Mlachila, the institution remains confident that South Africa has the ability to solve its own problems.

“To tell you the truth we – by ‘we’ I mean the institution – much prefer countries to resolve their own problems and I’ve no doubt that SA has the capacity to address its own problems in the various areas, especially on the growth front, as well as on the fiscal front,” he told a conference hosted by the Bureau for Economic Research (BER).

Montfort Mlachila, IMF senior representative in South Africa

Warning from Busa

Business Unity South Africa had warned that the country may need to approach the IMF for a loan unless something was done to stop the hemorrhaging of money through state-owned enterprises such as Eskom.

“The choice is stark yet simple,” said president of Business Unity South Africa Sipho Pityana in an open letter to the nation.

“Either we prescribe our own medicine, or someone else will prescribe it for us. And it will be bitter, bitter medicine.”

Business Unity South Africa

The bitter medicine is likely in reference to austerity measures that would be enforced by the IMF as conditions for granting the loan.

No loan required

The ruling African National Congress and South African Reserve Bank had hit back, stating they did not need to ask the international bank for a loan.

This has now been backed up by the IMF through Mlachila but it in no way means South Africa is out of the woods or, indeed, even heading in the right direction yet.

It just means that the capacity to solve our own problems exists.

According to Mlachila, structural reforms were needed to boost growth and something drastically needed to be done about the state of public debt.

“The public-debt trajectory is not favourable and frankly becoming uncomfortable, and the debt-service bill is crowding socially desirable spending,” he said.

Later in the conference BER projected a budget deficit of 6% of the country’s gross domestic product. This means the country is spending 6% more money than it is making, which is a huge problem and will only be made worse unless government spending is brought under control.

Montfort Mlachila, IMF senior representative in South Africa