Negative side of IMF loan to SA

Going cap in hand to the International Monetary Fund (IMF) to bail out your country is nearly always a sign of government failure. Whichever way you look at it, the announcement that South Africa has secured a $4.3 billion (about R70 billion at current rates) loan from the global institution is not something to celebrate.

The IMF is the “last chance saloon” for governments which have so mismanaged their finances that conventional banks run a mile before lending them money or do lend, but at punitive interest rates. That’s the situation in which our country finds itself … even before the Covid-19 crisis imposed huge new demands on the Treasury and the attendant lockdowns threatened to take our economy back to the Stone Age.

The negatives are that the IMF will often impose conditions, such as the infamous “economic structural adjustment programmes” which have been applied previously in other cash-strapped countries.

This harsh, market-dictated medicine has, in some cases, proved worse than the economic disease it was supposed to cure.

In Zimbabwe, for example, IMF demands for structural reform saw measures meant to benefit the poor, such as subsidised foodstuffs, scrapped … which led almost immediately to an acceleration of the cost of living, which indirectly brought about farm invasions and the huge exodus from their homeland of millions of hungry and jobless Zimbabweans.

That must not be allowed to happen here and nor must the government allow the vitally needed IMF money to be stolen, as has already happened with huge chunks of Covid-19 emergency budgets.

It is critically important that this borrowing does not become a habit and we join the list of African countries with outstretched begging bowls.

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