The International Monetary Fund “support the authorities’ efforts in addressing the challenging health situation and severe economic impact of the Covid-19 shock,” the Washington-based lender said in a statement Monday. “Once the pandemic is behind, there is a pressing need to ensure debt sustainability and implement structural reforms to support the recovery and achieve sustainable and inclusive growth.
Even before the pandemic hit, South Africa was stuck in its longest downward cycle since World War II and the gross domestic product probably contracted more than 30% in the second quarter, according to central bank forecasts. Government debt is now projected to peak at close to 90% of GDP in 2023-2024 and the budget deficit will swell to a record this year.
The lockdown that started on March 27 and has been eased gradually is weighing on output and will further reduce tax revenue that’s been falling short of targets for most of the past five years. President Cyril Ramaphosa announced a 500 billion-rand stimulus package in April and the National Treasury has said the government is seeking $7 billion of this from multilateral lenders.
The IMF in April doubled its emergency lending capacity to $100 billion, and Managing Director Kristalina Georgieva said that the fund will mobilize more than $18 billion to respond to requests from more than 40 African countries. The lender has now approved more than $14 billion in emergency financing to help nations on the continent, including $3.4 billion for Nigeria and $2.8 billion for Egypt. On top of that. the IMF last month approved a 12-month $5.2 billion standby arrangement for Egypt.