Finance minister Tito Mboweni has revealed that government intends to borrow US$7bn (R118bn) from international finance institutions, warning strongly that it is money which must be paid back.
“Government intends to borrow US$7bn from multilateral finance institutions for its pandemic response. This includes a US$1bn loan from the New Development Bank. As a member of the International Monetary Fund (IMF), South Africa intends to borrow US$4.2bn through the IMF’s rapid financing instrument, which is a low-interest emergency facility.”
Tabling his much-anticipated emergency budget on Wednesday afternoon, which was necessitated by the Covid-19 crisis, Mboweni painted a grim picture. He said the country was in a race to stabilise its growing debt if it was to avoid a looming crisis which would see it unable to service its debt.
“Our early projection is that gross national debt will be close to R4-trillion, or 81.8% of GDP by the end of this fiscal year. This is compared to an estimate of R3.56-trillion or 65.6% of GDP projected in February,” Mboweni said.
“Without external support, these borrowings will almost entirely consume all of our annual domestic saving, leaving no scope for investment or borrowing by anyone else. For this reason, we need to access new sources of funding. Government intends to borrow about US$7bn from international finance institutions to support the pandemic response. We must make no mistake, these are still borrowings. They are not a source of revenue. They must be paid back.”
The National Treasury had announced on Saturday that the New Development Bank had approved US$1bn in emergency assistance to South Africa. According to the budget review an additional US4.2bn dollars will be sought from the International Monetary Fund.
The finance minister has also made available R21.5bn to fund government’s Covid-19 fight.