SA is on track to get its $4.2bn (about R70bn) International Monetary Fund (IMF) Covid-19 emergency loan by the end of July, National Treasury director-general Dondo Mogajane said on Wednesday.
Negotiations between the Treasury and IMF staff are completed and a letter of intent has been drawn up for signature by finance minister Tito Mboweni and SA Reserve Bank governor Lesetja Kganyago.
The letter, which contains the commitments SA will make in return for the loan, will be served before the IMF board at its next meeting.
Mogajane said the letter is based on the commitments to fiscal consolidation made in the supplementary budget in June. This includes expenditure cuts of R230bn over the next two years; a commitment to freeze public-sector wages for 2020/2021; and a plan to arrest the rapidly rising debt-to-GDP ratio by holding it to 87% over the next three years. It would be difficult to deviate from the supplementary budget, which forms the basis of the letter, he said.
The letter of intent, once approved by the IMF board, is published on its website and the money then flows within days. The loan will be made through the IMF’s rapid financing instrument, which has an interest rate of about 1%. While this has fewer conditions than the IMF standby facility, the commitments in the letter of intent must be respected.
However, the first call to deviate from the supplementary budget has already been made with the department of public enterprises assuring SAA creditors and SAA employee representatives on Tuesday that the government will fund the restart of SAA.
The minimum amount required is an additional R10.4bn, which has not been provided for in the budget.
The department said that it will provide a letter of commitment to provide the funding by July 15. The Treasury, which must concur that the funding will be provided, has been silent on the matter.
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