IMF approves $4.3 bn to South Africa in biggest COVID-19 loan

Washington: The International Monetary Fund on Monday said it had approved $4.3 billion in aid to South Africa to help it fight the coronavirus pandemic.

“The IMF approved $4.3 billion in emergency financial assistance under the Rapid Financing Instrument (RFI) to support the authorities' efforts in addressing the challenging health situation and severe economic impact of the COVID-19 shock,” the Washington-based crisis lender said in a statement.

South Africa is the continent's most-industrialised economy and has the largest number COVID-19 cases, with more than 445,000 detected and 6,769 deaths as of Monday, according to the Africa Centres for Disease Control and Prevention.

South African Finance Minister Tito Mboweni in June predicted the economy would shrink 7.2 percent in 2020, its deepest slump in 90 years, and compared the ballooning public debt to a “hippopotamus... eating our children's inheritance.”

The South African treasury said the IMF money would go towards stabilising the debt, creating jobs, helping frontline health workers fighting COVID-19 and reforming the economy to spur growth.

“Going forward, our fiscal measures will build on our policy strengths and limit the existing economic vulnerabilities which have been exacerbated by the COVID-19 pandemic,” Mboweni said in a statement.

The money from the IMF is the latest disbursement under the RFI, which allows nations to circumvent the lengthy negotiations usually needed to secure a full economic assistance program — time most countries do not have as they struggle to cope with the coronavirus crisis.

IMF deputy managing director Geoffrey Okamoto said “a deep economic recession is unfolding,” exacerbated by South Africa's slow rates of growth, high unemployment and widening inequality.

The RFI money will help address the country's balance of payment needs "that emerged as a result of the pandemic and thus contain the economic disruption and its regional spillovers."

The money will specifically address “the fiscal pressures posed by the pandemic, limit regional spillovers and catalyse additional financing from other international financial institutions,” the IMF said.