Mboweni looks to IMF and World Bank for help
Mboweni looking to ‘access facilities for health purposes’
● Finance minister Tito Mboweni says SA will look to take advantage of any funding that the International Monetary Fund (IMF) and World Bank make available to support countries through the coronavirus crisis — and will not be “ideological” about it.
This comes after the country’s credit rating was junked by Moody’s following a week in which turmoil in the financial markets saw the cost of government borrowing spike, forcing the Reserve Bank to intervene to keep the bond market functioning in an orderly manner ahead of a lockdown expected to push the economy into a severe recession.
The Moody’s decision couldn’t have come at a worse time for SA, potentially making it more costly and more difficult for the government to borrow on the market at just the time when the recession will slash tax revenues. This in turn will force the government to increase its borrowing requirement if it wants to deliver on the spending promised in February’s budget.
Mboweni said he was very disappointed with the Moody’s decision and that the government must speed up structural economic reforms to get the economy going.
At a time when almost the entire economy is working remotely, he took aim particularly at the lack of progress on releasing broadband spectrum in SA. He said the country could use the national disaster to speed up progress.
“We can’t be talking about this forever. I will be speaking to the president about this. The matter can’t rest with the Independent Communications Authority and the communications department,” he said.
There has been speculation Mboweni might have to table an emergency budget, but he told the Sunday Times in an interview yesterday that he was not considering revisions to the budget at the moment.
The government would have to adjust and reprioritise, and see how to manoeuvre if borrowing costs increased, he said. It would also have to see how SA could use loans from multilateral institutions such as the New Development Bank, the IMF and World Bank.
“This morning in a conversation with the Reserve Bank and the Treasury I indicated that we should proceed and speak to the IMF and the World Bank about any facility that we can access for health purposes,” Mboweni said. “We take no ideological position in approaching the IMF and World Bank.
They are creating facilities for this environment and SA should also take advantage of those facilities in order to relieve pressure on the fiscus.”
The IMF and World Bank have been meeting in recent days to put extensive facilities in place for countries whose economies and health systems are taking strain as a result of the Covid-19 pandemic.
IMF managing director Kristalina Georgieva said this week that more than 80 countries had approached the IMF for assistance. While the World Bank can lend directly to governments for specific programmes in health, for example, IMF lending generally focuses on assisting countries that run short of dollars or hard currency to finance imports and service their foreign loans, and run into balance of payments problems.
SA has never previously had to access such funding from the IMF, although it has drawn on World Bank funding, including in the form of an almost $4bn loan (R70bn at current rates) to Eskom several years ago.
Moody’s said the key driver behind the downgrade was the continued deterioration in SA’s fiscal strength and structurally very weak growth, which the rating agency “does not expect current policy settings to address effectively”.
Though Moody’s raised the prospect in its report on Friday night that SA could face difficulty borrowing on the market if its public finances and market conditions deteriorated even further, Reserve Bank deputy governor Fundi Tshazibana said yesterday that SA did not currently have a dollar shortage or a balance of payments problem. “But if the situation were to evolve we would have to look at all the measures that are available to us.”