In a press release signed by Gediminas Vilkas– Media Relations Officer– on Monday, the International Monetary Fund(IMF) revealed it has approved $4.3 billion as emergency financial assistance to South Africa.
IMF said the COVID-19 outbreak is leading to a sharp economic contraction and significant financing needs in South Africa.
The Executive Board of the International Monetary Fund (IMF) said South Africa’s request for emergency financial assistance of SDR 3,051.2 million (US$ 4,286.5 million or 100 percent of quota) under the Rapid Financing Instrument (RFI) was granted to meet the urgent balance of payment (BOP) needs stemming from the outbreak of the COVID-19 pandemic.
IMF said the RFI will help fill the urgent BOP needs originating from the fiscal pressures posed by the pandemic, limit regional spillovers, and catalyze additional financing from other international financial institutions.
The institution further praised South Africa’s resilient handling of the Covid-19 virus, saying the Financial assistance rendered will complement the authorities’ strong policy response to the crisis.
Following the IMF Executive Board’s discussion, Mr. Geoffrey Okamoto, First Deputy Managing Director and Chair, issued the following statement:
“South Africa’s economy has been severely hit by the COVID-19 crisis, reporting the highest number of cases in sub-Saharan Africa. A deep economic recession is unfolding as the decline in domestic activity and disruptions in the global supply chain resulting from the COVID-19 shock have added to a pre-existing situation of structural constraints, subdued growth, and deteriorating social outcomes.
“The authorities responded swiftly to the crisis. The June Supplementary Budget Review presented to Parliament contains a plan to reprioritize budget appropriations toward health and mitigation spending and devote additional budgetary outlays to protect the poor, the unemployed, and the most affected businesses. The South African Reserve Bank (SARB) took strong and timely action by lowering significantly the policy rate and ensuring adequate liquidity conditions in the financial system.
“The emergency financing under the RFI will help fill the urgent BOP needs that emerged as a result of the pandemic and thus contain the economic disruption and its regional spillovers. The RFI will also help catalyze other disbursements. The authorities’ commitment to transparently monitor and report all use of emergency funds is crucial to ensuring COVID-19-related spending reaches the targeted objectives.
“There is a pressing need to strengthen economic fundamentals and ensure debt sustainability by carrying out fiscal consolidation, improving the governance and operations of SOEs, and implementing other growth-enhancing structural reforms. The COVID-19 crisis heightens the urgency of implementing these efforts to achieve sustainable and inclusive growth. Specific reform commitments at the time of the October Medium-Term Budget Policy Statement will be a critical step to buttress the credibility of the reform efforts and should be followed by steadfast implementation. Efforts to preserve the central bank’s inflation mandate and proactive bank regulation and supervision, particularly for small banks, will also be important.”