In this edition of the Business Day Spotlight, we are discussing what the newly approved International Monetary Fund loan means for the SA economy. Dr Sean Muller, a senior lecturer at the University of Johannesburg’s school of economics to discuss the issues. Early last week, the IMF approved SA’s first request in history for emergency aid, granting the country a $4.3bn loan towards mitigating the social and economic effects of the Covid-19 pandemic.
Muller says as large as this loan is, when one considers that the national budget was set at about R1.4-trillion for year, this is not an amount that will be a heavy burden on the country. It is manageable. The terms and conditions of the loan agreement are yet to be published but it is expected that these will likely hinge on ensuring that the commitments the government has made are in line with policies outlined in finance minister Tito Mboweni's supplementary budget, in June. These include reining in the budget deficit and containing growth in debt as a percentage of GDP.Muller says says structural reform continues to be one of the biggest risks to SA’s funds.
Muller does think the SA Reserve Bank it could have done more to explore alternative monetary policies that are now taking hold in other countries. The discussion also explores the confidence in the government to execute its plans, how possible corruption continues to be a risk, whether printing money is a viable alternative for SA and how a country should be managing its debts.
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