‘Mboweni is misleading SA on IMF loan being low-interest,’ says EFF

The Economic Freedom Fighters (EFF) issued a statement on Tuesday morning, rejecting the International Monetary Fund’s (IMF) decision to approve South Africa’s request of a $4.3 billion (R70.7 billion) loan to fund the country’s response to Covid-19.

It was announced on Monday that the South Africa’s emergency financial support under the Rapid Financing Instrument (RFI) was approved by the IMF, which is a low interest loan according to National Treasury.

The African National Congress (ANC) had initially voiced its support of the IMF loan during the negotiation stages.

The EFF argued that the new loan would only increase the money owned to the IMF, claiming that it was “the biggest political blunder in South Africa’s history”.

“The loan from the IMF is in addition to a loan of R5 billion from the African Development Bank and R16 billion from the New Development Bank.

“In total, the government has borrowed more than R90 billion, with 77% of the borrowed money coming from the IMF. This is the biggest political blunder in the history of South Africa.”

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The party said it was concerning that the government borrowed an amount from the IMF which is double the country’s budget.

“The budget tabled by the Finance Minister in Parliament in June only allocated R43.2 billion additional funds to the budget.

“R32 billion was allocated to the national government, and R11 billion was allocated to the local government.

“The rest of the funding was provided through reprioritisation process while many programme’s budgets were cut. Yet the government borrowed twice the amount of money allocated in the budget.”

The red berets further said that government was borrowing money without a “believable plan to deal with already uncontrollable debt or economic recovery”.

“It is most concerning that the rush to borrow money from the IMF was considered the first option when there is sufficient money in the domestic capital markets, current account in surplus and reserves. South Africa is not short of money to warrant borrowing money from the IMF.”

The party continued to say that Mboweni was misleading the country by suggesting that the IMF loan had low-interest.

“The money from the IMF is dollar-denominated, and as such, it will have to be paid back in the dollar. In the absence of sound and practical economic recovery strategy, the Rand is unlikely to stabilise.

“In January, one U.S dollar was equal to R13,99; today, one U.S dollar is equal to R16.65. In Rand terms, the money borrowed by South Africa would have more than doubled at the time of repayment. It is not true that the loan is cheap.”

The South African Communist Party (SACP) and Congress of South African Trade Unions (Cosatu) also said they were against the decision to borrow money from the IMF, eNCA reported.

READ MORE: IMF approves $4.3bn ‘financial support’ to South Africa to deal with Covid-19

Cosatu spokesperson, Sizwe Pamla said that the loan would only lead to the money being looted amid the corruption scandals that has been plaguing South Africa for years.

Pamla highlighted the alleged looting of the R500 billion Covid-19 relief funds allocated to fight the pandemic.

“This loan and all this corruption affect the poor and tax payers in most cases. So it is dangerous to request a loan with such extreme conditions in the country,” he said.

Recently, President Cyril Ramaphosa announced during his nation address last Thursday that he had signed a proclamation authorising the Special Investigating Unit (SIU) to investigate Covid-19-related corruption.

The president confirmed that 36 cases related to Covid-19 corruption were being investigated and prosecuted, which included fraudulent Unemployment Insurance Fund (UIF) claims and overpricing of procurement and fake NGOs.

Mboweni expressed his opinion on the matter, calling on leadership to deal with those involved decisively “without fear, favour, or prejudice”.

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