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Finance Minister Tito Mboweni says that the International Monetary Fund (IMF) loan to South Africa “will not be used specifically to pay salaries.”
Responding in a written parliamentary question and answer session, the finance minister said the loan is a special facility created for member countries experiencing emergencies.
“It is called the Rapid Financing Instrument (RFI) and it has no conditionalities nor does it require the implementation of an IMF structural program,” he said.
“However, countries that receive emergency funding from the IMF have committed to using and reporting spending in a transparent manner. Therefore, the receipts (or disbursements) of the loans will be part of the National Income Fund that will be used to support existing government programs, which could include the payment of salaries ”.
Mboweni said access to the RFI was specifically expanded to help countries deal with balance of payments (BOP) issues arising from the Covid-19 pandemic.
He said the loan provides a low-interest opportunity for South Africa to provide counter-cyclical support to the economy and finance emergency support related to Covid-19.
“In other words, it mitigated the need for massive spending cuts in response to the government’s dramatic revenue shortfall and averted an explosion in financing needs triggered by high-cost loans,” he said.
“Reporting on the use of the loan will be part of the government’s overall responsibility to publish all information related to Covid-19 related support programs, including acquisitions.”
Loan
The IMF approved a request from South Africa for emergency financial support under the Rapid Financing Instrument (RFI) in the amount of $ 4.3 billion (R70.6 billion) in July 2020.
The IMF has previously said that it will not impose any terms beyond what South African law states on how the funds can be used.
This means that the funds will be subject to the same procurement and accounting requirements as all other budget expenditures.
In addition, the government will be held accountable in its future budget statements and reports to parliament on how the funds have been used.
South Africans will also be able to demand that the government demonstrate that the funds have been spent in a manner consistent with the requirements of the constitution and the bill of rights.
This means that the government must demonstrate that it is using the maximum available resources, from any source, to help realize all the rights that South Africa’s constitution and international commitments grant to South Africans.
The IMF requires South Africa to repay the funds to the IMF within 20 months, starting 40 months after the loan is disbursed.
Read: Expect South Africa’s GDP Growth To Surprise To The Upside – Economist
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