Deputy finance minister David Masondo has defended the government’s recent $1.5bn (R27bn) development policy loan agreement with the World Bank, insisting the funding is aligned with the National Treasury’s broader commitment to responsible and sustainable borrowing.
The loan, which was announced on Monday as part of the government’s efforts to bolster infrastructure spending and support structural reforms, comes at a time when the country faces pressure to narrow its budget deficit.
“Borrowing in itself is not bad. The question is what are you borrowing that money for? You’re borrowing for infrastructure to grow the economy. And the second issue about borrowing is whether the you will be able to service your debts and what enables you to service your debt to pay back the money that you borrow. It’s economic growth,” Masondo said.
“If we borrow to aid our economic growth, that is sustainable borrowing sustainable debt.... So the loan that we have received from the World Bank is consistent with a our intention to grow our economy.”
Business Day previously reported that the government sought to augment the World Bank bank loan and was in discussions with the French Development Bank (AFD) on a €300m concessional loan, as well as a further loan from the New Development (Brics) Bank.
The loans could raise $2bn-$3bn of the almost $7.2bn, or R130bn, in foreign borrowing the Treasury has pencilled into the budget to help finance the government’s borrowing requirement over the next three years, with the rest raised on the market.
Masondo was on Tuesday on the sidelines of the Supreme Audit Institutions (SAIs) summit from countries that make up the G20. He said the Treasury’s approach remained disciplined and transparent and that this latest facility would help to bridge funding gaps for vital investments in areas such as energy, logistics and water infrastructure, while reinforcing the state’s commitment to prudent fiscal management.
The EFF has raised concerns regarding the new World Bank loan considering that SA’s “debt-service costs have now ballooned to over R426bn per year, more than what is spent on social development, health, or basic education”.
The opposition party has written to National Assembly speaker Thoko Didiza to introduce amendments to the Public Finance Management Act of 1999.
“These amendments will place strict limits on the executive’s borrowing powers, particularly those of the minister of finance, by requiring prior approval of all foreign loans by parliament. Crucially, the amendments will also mandate full public disclosure of all terms and conditions attached to these loans, including policy undertakings, letters of intent, and restructuring requirements,” the EFF said.
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