While the governing party aims to attract more capital, the global lender will want policy reforms before it offers a large borrowing facility
Growth paths are elusive as our economic debates are warped by politics, while repairing the debt trajectory requires astute restructuring and policy reforms. The IMF’s advantage is that it deciphers economic woes and governance failures dispassionately. But will the lender of last resort deem SA’s politics incorrigible?
The IMF is uniquely experienced at assessing sovereign debt sustainability. Our debt trajectory cannot be made sustainable without restructuring the economy to swell exports while “reprofiling” government and household debt. But how much political adaptability is plausible before, or even after, the 2024 scheduled elections? Whereas betting on 2024 is a distant and vague proposition, the ANC’s lockdown decision-making lethargy points to it minimising IMF engagement for as long as possible.
The ANC wants to attract more capital to feed its patronage network, but the nation’s repayment capacity has been exceeded. Focusing on infrastructure investments sidesteps the implications of stagnating domestic consumption. In the absence of a sustained surge in exports, accompanied by much debt relief, our horrendous levels of unemployment and poverty will be entrenched for decades.
New loans to overindebted, economically enfeebled entities are typically contingent on policy shifts and concessions from existing debtholders. A substantial IMF engagement would need to meaningfully mitigate our economy’s core disenablers, patronage politics and inadequate market access.
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