World ratings agency Moody’s has expressed scepticism on South Africa’s efforts to stabilise its recession- and coronavirus-hit economy in four years as envisaged by Pretoria, the agency said on Friday.
According to Moody’s, “it will be extremely difficult” for the government of President Cyril Ramaphosa to stabilise the situation quickly considering the country’s ballooning debt, exacerbated by the pandemic and the continuing nationwide lockdown.
Finance Minister Tito Mboweni this week presented a supplementary budget that projected a wider budget deficit, while public debt was estimated to be more than three-quarters of gross domestic product in the medium term.
The solution to this was for South Africa to borrow funds from international financial organisations like the New Development Bank of the Brics and a dreaded US$4.2 billion loan from the International Monetary Fund have become a bone of contention among the government’s partners.
The ruling Africa National Congress (ANC)’s alliance partner, the South African Communist Party (SACP) and several lawmakers have expressed reservations over Mboweni’s move to secure these loans, saying this would compromise the country’s sovereignty.
Their argument is that conditions such as structural adjustments, which normally come with IMF loans, have in the past bankrupted their recipients.
But the minister said the loan it was seeking from the IMF would have no such conditionality, adding that the country to marshal all available resources in order to stimulate growth.
South Africa’s economy was in recession before the coronavirus outbreak and Mboweni projected the economy would contract 7.2% in 2020.
NM/as/APA