South Africa Seeks $5B From International Lenders To Finance Covid-19 Economic Stimulus Package
South Africa’s government is responding to the economic impact and health challenges of the coronavirus crisis by launching a $26.6 billion stimulus package.
Part of that stimulus package is expected to be financed by $5 billion in loans from international lenders including the International Monetary Fund (IMF), World Bank, New Development Bank, and the African Development Bank, according to Bloomberg.
South Africa is the African country with the most coronavirus cases. It has 7,808 confirmed cases of covid-19 with 153 deaths.
The measure was imposed by the government to prevent the spread of the coronavirus.
The country is effectively still in a lockdown, with only a few industries allowed to operate alongside essential workers. An estimated 1.5 million South Africans began working again on May 1 in industries including food service, retail, mining, oil and gas, and information technology.
The lockdown remains fairly strict. Some exercise like jogging, walking or cycling is allowed between 6 a.m. and 9 a.m., but otherwise, only essential travel such as grocery shopping and doctor’s visits is permitted during the day and a strict curfew is in place between 8 p.m. and 5 a.m.
The sale of takeaway food is permitted for delivery only — from fast food outlets and restaurants — while some clothing stores can operate under strict hygiene and social distancing guidelines to sell winter clothing. The sale of cigarettes and alcohol is still not permitted.
Supermarkets and pharmacies remain open while smaller specialty food stores can operate if they can do so under strict guidelines. Those disobeying lockdown rules are prosecuted, with nearly 120,000 people arrested for non-compliance, according to TheGuardian.
The lockdown has had devastating effects on the economy and individual livelihoods. South Africa’s economy is expected to contract by 6.1 percent in 2020, according to its central bank.
In response to the health and economic impact of the coronavirus, South Africa President Cyril Ramaphosa announced an “extraordinary coronavirus budget” amounting to $26.6 billion which will be injected into the economy, News24 reports.
That stimulus package is worth 10 percent of South Africa’s GDP. It is designed to safeguard the poor and most vulnerable through increased social grants while attempting to protect jobs and businesses by providing wage subsidies and loan programs for businesses.
The stimulus package includes $1.07 billion to bolster the health budget to prepare the country for increased covid-19 cases while $2.7 billion will boost welfare payments for the elderly and poorer individuals raising children.
The economic package includes support for businesses in the form of a $10.73 billion in loan guarantees for companies and $3.75 billion worth of tax relief, the Daily Maverick reported.
A further $5.38 billion has been set aside to “protect and create jobs“, according to the president, while businesses can access $2.15 billion to pay wages for employees that they would otherwise have to layoff.
The Washington D.C.-based IMF, which monitors the financial and economic policies of its member governments around the world, has indicated that South Africa is entitled to apply for up to $4.2 billion in response to the health crisis, according to EngineeringNews.
That loan would not be tied to any conditions or austerity measures that are typically imposed on lending countries from the IMF, as South Africa is a paid-up IMF member requesting the exact amount that they are entitled to in response to the crisis.
The IMF is expected to charge a 1 percent interest rate on the loan.
Covid-19-related funding available to South Africa from the World Bank amounts to between $55 million and $60 million.
The Washington D.C.-based World Bank is an international financial institution, funded by its 189 member countries, that provides loans to reduce poverty and build shared prosperity in its member countries.
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The New Development Bank, a multilateral development bank established by the BRICS countries Brazil, Russia, India, China, and South Africa, is making $1 billion in covid-19 funding available for each of its member countries, the Daily Maverick reports.
South Africa can also access loans from the Ivory Coast-based African Development Bank, which has created a $10-billion covid-19 response fund to assist African countries in fighting the pandemic.
The African Development Bank aims to contribute to the economic development and the social progress of African countries.