SA to report quarterly on R70bn IMF loan
The Treasury will also give regular reports on progress of its plans to stabilise debt and promote growth through structural reforms
The International Monetary Fund (IMF) expects SA to provide quarterly reports on its Covid-19 support programmes to individuals and companies, as well regular reports on progress of its plans to stabilise debt and promote growth through structural reforms, the IMF’s resident representative Montfort Mlachila said on Tuesday.
Mlachila was a guest of asset manger Ninety One at a webinar in which he briefed participants on the reporting requirements of the loan.
SA received its first ever IMF loan last week, a $4.3bn (about R70bn) single disbursement under the rapid financing instrument, an IMF tool to assist countries in the event of catastrophe.
Mlachila said the loan money will be monitored through periodic reports and the publication of all contracts, including the beneficial owners of the companies involved, by the National Treasury. It is also required that Covid-19 spending be audited.
“As the MD of the IMF said: spend what you need but keep the receipts,” said Mlachila.
As the institution does not have an investigative capacity it will rely on the general public, the media and civil society organisations to ensure good governance it said.
“Unlike a traditional IMF loan, the full amount was given upfront. Traditionally, we have targets and reform benchmarks. In this case we will be monitoring some of the commitments the government has made on the growth side to advance reforms. We are not alone in this, other international finance institutions — the African Development Bank; the World Bank — will have an interest in the same,” he said.
The IMF will also monitor the progress with reforms during its routine visits to SA and its annual consultation with member countries.
In its letter of intent to the IMF in applying for the loan, the government committed SA to taking further steps towards fiscal consolidation when it tables the medium-term budget policy statement in October to ensure that public debt peaks at 87.4% in 2023/2024 and declines thereafter. This includes cutting spending and, in particular, reducing the growth of the public-sector wage bill and rationalising transfers to stateowned entities.
The government also undertook to implement structural reforms that could restore growth and confidence in the economy.
Mlachila said that while fiscal consolidation is important, what is of greater importance for SA is to grow the economy, which would make its debt burden more affordable.
“The pay-off from growth is so much more than the pay-off from fiscal consolidation. Fiscal consolidation is necessary but not sufficient, and too much undermines growth. So the country really doesn’t have an option but to do everything it can to get growth,” he said.
A critical dimension of this is to restore confidence in the economy.
“Politically, you need to revive business confidence, so speak with one voice, be consistent and deliver on a few concrete actions so you change the perceptions of investors. And once investors and consumers see things are changing, it can be a virtuous circle,” Mlachila said.
One such quick win would be the release of broadband spectrum, which could work positively for growth, investment and consumers. —