SA will utilise IMF facilities for COVID-19 relief – Mboweni

Finance Minister Tito Mboweni has revealed that South Africa will approach the International Monetary Fund (IMF) and World Bank for relief from a financial crisis brought on by COVID-19.

Measures imposed to inhibit the spread of the virus, both locally and internationally have brought the economy to a virtual standstill.

Junk status against the backdrop of a global recession

On Friday 27 March, Moody’s downgraded South Africa’s credit rating to junk status. The rating’s agency cited the country’s rising national debt, weak economic growth and ongoing electricity supply problems as the motivation for the downgrade. 

Mboweni is hopeful that the IMF will provide facilities for financial relief given that the COVID-19 virus is a global pandemic.

“This morning in a conversation with the (central) Reserve Bank and the Treasury I indicated that we should proceed and speak to the IMF and the World Bank about any facility that we can access for health purposes,” Mboweni said in an interview with the Sunday Times.

South Africa’s informal sector will be devastated by a 21-day lockdown and even large firms like Edcon could be dealt a knockout blow by the economic slowdown.

The IMF declared a global recession on 27 March and the group plan to double their financial capacity to alleviate the crisis.

IMF willing to help

IMF chair and managing director Kristalina Georgieva said that although they were predicting an economic rebound in 2021, funds would be made available to alleviate the crisis.

Georgieva stressed that the fund is doing everything they can to respond to the extraordinary health crisis that is the COVID-19 pandemic and help mitigate the economic fallout from it.

“We do project recovery in 2021. In fact, there may be a sizeable rebound, but only if we succeed with containing the virus everywhere and prevent liquidity problems from becoming a solvency issue.”

Reports claim that 50 low-income and 31 middle-income countries have approached the IMF for emergency financing so far.

South Africa and Mboweni are not too proud to ask for help

With the IMF and World Bank set to unveil support for its member states soon, Mboweni is keen to accept whatever help the organisations can offer.

“We take no ideological position in approaching the IMF and World Bank. 

“They are creating facilities for this environment, and SA should also take advantage of those facilities in order to relieve pressure on the fiscus,” Mboweni said.