The International Monetary Fund approved a $4.3 billion (Dh15.7bn) in emergency funding to South Africa to help the continent's second biggest economy fight the impact of the Covid-19 pandemic.
The financing – the single largest amount disbursed so far to pandemic-hit country – will help South Africa's authorities address the "the challenging health situation" and "severe economic impact of the Covid-19 shock," the Washington-based lender said late Monday.
The loan is equal to 100 per cent of South Africa's quota under the Rapid Financing Instrument (RFI) and will help meet the country's "urgent" balance of payment needs resulting from fiscal pressures posed by the coronavirus crisis, the IMF said. It will also "limit regional spillovers, and catalyse additional financing from other international financial institutions".
South Africa has been grappling with weak economic growth, high unemployment, poverty, and income inequality even before the pandemic started battering its economy. The country's economy, was already reeling from a Moody’s downgrade to junk in March, and is now projected to shrink 8 per cent instead of the previous 5.8 per cent contraction forecast by the fund.
The country has reported the highest number of cases in sub-Saharan Africa with 452,529 confirmed cases as of Monday, according to Johns Hopkins University, which is tracking the pandemic.
The coronavirus outbreak has led to a "sharp economic contraction" and given rise to significant financing needs in South Africa, according to the IMF.
"There is a pressing need to strengthen economic fundamentals and ensure debt sustainability by carrying out fiscal consolidation, improving the governance and operations of SOEs [state-owned enterprises], and implementing other growth-enhancing structural reforms," Geoffrey Okamoto, the IMF's first deputy managing director and acting chair, said.
"The Covid-19 crisis heightens the urgency of implementing these efforts to achieve sustainable and inclusive growth."
In addition, preserving the central bank's inflation mandate and proactive bank regulation and supervision, especially for small banks, will also be important, he said.
The IMF has so far approved more than $14bn in pandemic loans for African countries.
Earlier this year, the lender doubled its overall emergency financing to $100bn as the pandemic disrupted businesses and prompted governments to launch massive stimulus measures to offset the impact of the health crisis.
In July, the IMF temporarily increased the amount of financing member countries can request in a year and removed caps on the number of funding disbursements poor countries can secure.
