IMF, World Bank to help SA fund coronavirus relief budget
President Cyril Ramaphosa's government has gone cap in hand to multilateral finance institutions to seek funds to help fund the country's R500bn economic and social relief package to mitigate the effects of the Covid-19 pandemic on the country's economy and its citizens.
In yet another televised address to the nation on Tuesday night, Ramaphosa said his government would reprioritise its budget for the 2020/2021 financial year in order to find R130bn needed to finance the “extraordinary coronavirus budget” amounting to R500bn — or 10% of the GDP.
To finance its shortfall on the coronavirus budget, he said the government would be asking international finance institutions such as the International Monetary Fund (IMF), the World Bank, the Brics bank and the African Development Bank (ADB).
This was despite some sections with the ANC-led tripartite alliance being opposed to the idea of seeking financial rescue packages from these institutions, particularly the IMF and the World Bank.
President Cyril Ramaphosa announced on April 21 2020 that the South African government will make an additional R500bn available to assist in the fight against Covid-19. The money will come from reprioritising the country’s current budget and from international institutions such as the International Monetary Fund (IMF) and the New Development Bank (NDB). Here’s where the government will spend the money.
Before Ramaphosa tabled his coronavirus budget to the nation on Tuesday night, he is said to have assured ANC leaders on Monday that any IMF loan to his government would come with no strings attached.
Ramaphosa also said on Tuesday that he had consulted widely on his coronavirus budget and the decision to approach the IMF and the World Bank, including all the nine provincial premiers and the social partners at the National Economic Development and Labour Council (Nedlac).
“The impact of the coronavirus requires an extraordinary ... budget of around R500bn to direct resources towards fighting the pandemic. This will include the reprioritisation of around R130bn within the current budget,” he said.
“The rest of the funds will be raised from both local sources, such as the Unemployment Insurance Fund, and from global partners and international finance institutions. To date, the World Bank, International Monetary Fund, Brics New Development Bank and the African Development Bank have been approached and are working with the National Treasury on various funding transactions.
“Some of these institutions have created financing packages that are aimed at assisting countries that are having to address the coronavirus crisis, like us.”
This would also see millions of social grants beneficiaries received increased benefits in the next six months, while the government would introduce a new but temporary coronavirus grant for people not receiving social grants or UIF benefits.
Ramaphosa told the nation that Covid-19 has had a debilitating effect on an already poorly performing SA economy and special measures needed to be found to deal with the impact of the coronavirus.
The president said an amount of R20bn would be strictly directing at fighting the government health response to the pandemic. He said this would include managing the expected spike in the number of cases in the coming months.
“If we are to successfully manage the anticipated surge in cases and ensure that everyone who needs treatment receives it, we must provide for additional expenditure on personal protective equipment for health workers, community screening, an increase in testing capacity, additional beds in field hospitals, ventilators, medicine and staffing.”
Municipalities, which have had their revenue streams adversely affected by Covid-19, would also be allocated an additional R20bn to assist them to continue rendering services.
“Additional funding of R20bn will ... be made available to municipalities for the provision of emergency water supply, increased sanitisation of public transport and facilities, and providing food and shelter for the homeless.
“Details will be announced in the adjustment budget tabled by the minister of finance.”
DA interim leader John Steenhuisen said his party welcomed Ramaphosa's relief package.
“The president has done a good job and I think that the speech was the right speech at the right time. If we can roll it out properly — all the measures announced by the president this evening — we'll be able to save lives and livelihoods. The DA been absolutely about this point certain for the last three weeks,” he said.