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Mboweni: SA won't consider IMF's adjustment programme funding

The country's economy has been battling poor growth and with the effects of COVID-19, the situation appears to be direr.

Finance Minister Tito Mboweni delivers 2020 Budget Speech in Parliament, Cape Town, on 26 February 2020. Picture: GCIS.

Editor's Note: Please note that the headline has been corrected after erroneously stating that SA would not consider IMF funding to help fight coronavirus. We apologise for the error.

JOHANNESBURG/PRETORIA - Finance Minister Tito Mboweni said South Africa would not consider funding from the International Monetary Fund (IMF), which would be accompanied by a structural adjustment programme.

The country's economy has been battling poor growth and with the effects of COVID-19, the situation appears to be direr.

Mboweni said when it came to structural adjustments, government knew what to do.

He said government would revise its fiscal framework to take into account the effects of COVID-19.

This came with the news that the Reserve Bank has readjusted its projected GDP.

Governor Lesetja Kganyago made the announcement on Tuesday, when saying the repo rate was being lowered by 100 basis points.

"The bank expects GDP in 2020 to contract by 6.1% compared to -0.2% expected just a few weeks ago."

However, Mboweni said a number of elements were planned for government's fiscal response, including re-prioritising some expenditure towards healthcare and a clear plan to stabilise debt.

Meanwhile, the International Monetary Fund is providing debt relief to 25 countries, 19 of them in African to lighten their debt obligations while fighting the COVID-19.

The money will come from the fund’s Catastrophe Containment and Relief Trust.

IMF Managing Director Kristalina Georgieva said the debt relief would run for an initial period of six months.

She said it would enable the poor and vulnerable countries to channel financial resources towards dealing with the COVID-19 pandemic.

Advocacy groups have been calling for debt cancellation as relief for African countries hit by coronavirus infections and the drastic economic measures needed to curb its spread.

The World Bank has forecast that COVID-19 would drive Africa into the first recession as has experienced in a quarter of a century.

WHAT AFRICA’S ECONOMY IS LOOKING LIKE

• Things are looking pretty bleak – SARB is predicting a GDP contraction of between 2% and 4% this year,

• The World Bank in Africa calling the contraction higher – between 2,1% and 5% for sub-Saharan Africa, with the possibility that the three richest nations – Nigeria, Angola, and South Africa - will be hit even harder (some
projections putting the GDP contractions as high as 7%, specifically for Angola and Nigeria that make a lot of their money from oil),

• This will be the region’s first recession in a quarter-century,

• World Bank is also warning of a possible trifecta of damage to Africa – not just to GDP growth, but also as lockdowns lead to a decrease in agricultural production, prompting a potential food crisis. The third aspect is a likely decrease in the volume of food imports to Africa,

• President Cyril Ramaphosa, in his capacity as AU head, has assembled a trio of African envoys, including former Finance Minister Trevor Manuel, to make the case for aid and debt relief for the continent,

• The IMF and World Bank will be going ahead with their scheduled Spring meetings – albeit via teleconference – and Ramaphosa will be there too, making the case in person.