Oliver Meth
JOHANNESBURG, South Africa –The World Bank has given South Africa yet another financial lifeline of $750m loan in a bid to accelerate the country’s Covid-19 response. The announcement by the bank was made over the weekend, in a joint statement.
The government, spearheaded by President Cyril Ramaphosa approached the International Monetary Fund (IMF) and the World Bank for emergency loans, to muscle up their response to the pandemic.
In July 2020, the IMF loaned the government $4.3 billion and now the World Bank has also poured in, providing $750-million.
The loan has been offered under the World Bank’s development policy loan programme, which offers countries financial support that typically comes with interest rates of about 1% or 2%.
Economists have welcomed the announcement by the bank and have emphasised that this should not be seen as ‘new’ financing.
“It already formed part of the foreign loans included in the fiscal framework outlined in the November 2021 Medium Term Budget Policy Statement (MTBPS),” the Bureau for Economic Research (BER) said.
According to the government, the loan will be used to shield the poor and vulnerable from the adverse socioeconomic impacts of the pandemic.
The World Bank budget support is coming at a critical time for us and will contribute towards addressing the financing gap stemming from additional spending in response to the Covid-19 crisis,” Dondo Mogajane from South African treasury said in a statement.
Mogajane added, “It will assist in addressing the immediate challenge of financing critical health and social safety net programs whilst also continuing to develop our economic reform agenda to build back better.”
As the second largest economy in Africa, South Africa’s economic performance has spillover effects on other countries in the region. Its recovery and successful economic development will provide an economic boost to the entire region.
The Development Policy Loan (DPL) by the World Bank supports the implementation of South Africa’s Economic Reconstruction and Recovery Plan (ERRP) aimed at protecting lives, livelihoods and supporting a more inclusive and resilient growth path.
It reflects priorities to modernise the country’s social protection and health services and to improve delivery systems which will apply even beyond the pandemic. It also enhances financial sector stability, specifically the establishment of a deposit insurance scheme. It further supports South Africa’s commitment to climate change.
The funding is a low interest loan that contributes to the government’s fiscal relief package while reinforcing South Africa’s decisions on how best to provide relief to the economy and those worst affected by the current crisis.
There are many questions, suggestions and no certainty as to what the finance would be used for, with civil society and the country’s largest trade union, Cosatu calling for the extension of the R350 ($23) social relief of distress grant introduced in response to the Covid-19 pandemic.
“The R350 Covid SRD grant has had a significant positive impact on the lives of the poor, but more particularly the unemployed,” Ramaphosa said in a statement on Sunday (23 January). He added that the government must examine the feasibility and affordability of providing some form of income support for the poor and unemployed.
The coalition of civil society groups has called for the extension of the grant to form the basis of a new Basic Income Grant (BIG).
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