Washington-based lenders long ago changed their top-down unilateral approach
It took the Covid-19 crisis to break a taboo that had been in place since the birth of democracy in SA. In the depths of the pandemic, with the economy all but shut down, tax revenue tanking and huge demands for the government to spend on health care and relief for the most vulnerable, SA at last said yes when the IMF was dishing out emergency funding across the globe.
But the . And when Covid hit they offered huge amounts of support to countries hit by the pandemic. SA took advantage. It borrowed $4.3bn of low-interest emergency money from the IMF and followed up with loans from the New Development Bank, the African Development Bank and more recently the World Bank.
Added to that SA has recently tied up loans from German development finance institution KfW and its French equivalent, AFD, for a total of €600m as part of the $8.5bn Just Energy Transition Investment Plan agreed with SA’s international partners at the COP climate summit. And now the Treasury has revealed it is in talks with the World Bank on a second, $1bn DPO which it has requested.
It won’t win too many friends on international bond markets for doing so, with many keen to see SA come back on a regular basis. But it is a no-brainer in so many ways. First is that the money is so much cheaper than market funding. In a high interest rate environment globally, that matters more than ever. And paying less interest means more cash available for more worthwhile spending that the government needs to do, whether on health and education and security or on infrastructure.
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