IMF move yields the conditioned response — but it may wear off

When the government had a highly successful $5bn (R82bn) international bond issue in September last year, taking advantage of favourable market conditions to borrow even more dollars than initially planned, nobody said a word on Twitter. When it borrowed $4.2bn from the International Monetary Fund (IMF) this week, the twitterati went wild. The responses came in at least three varieties. First was the “don’t give the money to the government/political elite, they will just loot it” variety. Second were many tweets along the “we’ve sold our country to Washington” line. And then there was simply some woeful ignorance: why couldn’t we just borrow at home instead of going to the IMF, asked one post (we did — R3.4-trillion of government loans on the domestic market and counting).

But the favourite was surely finance minister Tito Mboweni’s analysis: “Vera the Ghost! When I was a kid and growing up … We heard a lot about this Ghost uVera. Today it seems some international government loan is like her, Vera the Ghost has arrived. Take cover!”

But where did uVera come from? In part it’s the legacy of the IMF’s authoritarian, one-size-fits-all structural adjustment programmes of the 1970s and ’80s — the socalled Washington Consensus, which often caused such economic destruction in the emerging-market countries that had to go to the IMF that the fund long ago revised its approach.

But the IMF uVera is also a particularly home-grown ghost — and one

Mboweni himself can take some blame for. Back in the early days of democracy, he and his colleagues in the ANC and the cabinet were adamant that SA must chart its own economic path without falling into

Washington’s clutches. They had inherited a huge apartheid debt burden and a bloated bureaucracy. They had to do some serious fiscal consolidation if the new government was to gain the space to lift social spending and redress apartheid’s ills. They also had to set in motion a series of structural reforms to open up and rebuild an ailing economy.

The IMF bogeyman was an important lever to tackle the vested interests and get the country to go along with some tough changes — if we don’t get our own house in order, we will have it forced upon us, was the clear message. It helped to enable the new ANC government to effect a series of difficult fiscal and structural reforms in the late 1990s that by the early 2000s had opened up space for the government to ramp up social grants and economic infrastructure while slashing debt and lifting its credit ratings.

That virtuous cycle has long ago reversed into a vicious cycle of spiralling debt and economic stagnation. And then came Covid, and the prospect of a sovereign debt crisis within two or three years.

Now, the government again urgently needs to implement very tough fiscal measures and structural reforms. And this time Mboweni doesn’t really have uVera to help him.

True, the IMF Rapid Financing Instrument loan isn’t the full-on programme that would come with conditions the IMF could enforce after the fact. Rather, SA’s letter of intent commits it to delivering on its own repeated promises of fiscal sustainability and structural reform, not to mention combating corruption. And while the IMF has gone along with this, it doesn’t pretend not to be sceptical. But though the R70bn from the IMF is just a fraction of the R777bn the government needs to borrow this year, we can’t get it again next year. And if the government doesn’t start showing evidence soon of its ability to tackle the vested interests and deliver on its fiscal promises, it will find it ever more costly and difficult to meet its borrowing needs.

That’s why there’s reason to believe we may be back at the IMF in a couple of years for a full programme that could provide multiples of the $4.3bn over time, with conditions. That prospect may not be ghostly enough to give Mboweni the leverage he needs. But if Twitter is anything to go by, better communication and education couldn’t hurt.

There’s reason to believe we may be back at the IMF in a couple of years