TELITA SNYCKERS: The IMF: imperialist suffocator, or business rescue practitioner?
Loading player...
As FM editor Rob Rose recently pointed out (../2020-08-24-rob-rose-like-it-or-not-sa-lurches-towards-imf/), like it or not, SA is lurching towards a clumsy embrace with the International Monetary Fund (IMF), hot on the heels of a Covid-linked loan.
The ANC has long been wary of the IMF. After Nelson Mandela came to power, he reportedly saw the potential benefits of a cheap loan, but the ANC rejected the IMF’s offer of assistance. This status quo continued until last month, when the IMF loaned us $4.3bn as part of its “rapid financing instrument”, which came with a low 1.1% interest rate and some minor conditions.
The government committed to managing the IMF’s emergency financial assistance with full transparency and accountability.
Yet it has not done so.
The IMF’s most recent review of SA paints a worrying picture: subdued investment and exports, increased uncertainty, depressing growth and worsened social indicators.
Risks are materialising at state-owned enterprises (SOEs’); high fiscal deficits have boosted debt; nonresident investors are shedding equities and local currency bonds; inflation is expected to increase; the 30.1% unemployment rate is set to worsen; and the government cut its revenue projection by more than R300bn.
Back in February, the government said an additional R40bn in taxes needed to be raised over the next four years. But that was before the coronavirus came to town. Now, tax collections are lagging 23% compared to last year, and under lockdown the SA Revenue Service (Sars) has forfeited at least R82bn.
SA doesn’t just have a revenue problem, it has a spending problem. As economist Mike Schussler points out, government is spending nearly R50bn a month more than it collects in taxes.
We lost our economic sovereignty a long time ago
The ANC’s left and its alliance partners fear that accepting financing from the IMF would mean that we’d lose our “economic sovereignty”.
For most of the glory days at Sars, the organisation was keenly aware of the fact that it was not just collecting taxes – it was the axis on which our country’s sovereignty turned. The less Sars collected, the more the country had to borrow, and the more it had to borrow, the more it became beholden to its lenders.
But today, as Duncan Artus, chief investment officer at Allan Gray, recently pointed out, the cost of our 10-year government debt exceeds the growth in our economy.
The government has become little less than a delinquent ...
The ANC has long been wary of the IMF. After Nelson Mandela came to power, he reportedly saw the potential benefits of a cheap loan, but the ANC rejected the IMF’s offer of assistance. This status quo continued until last month, when the IMF loaned us $4.3bn as part of its “rapid financing instrument”, which came with a low 1.1% interest rate and some minor conditions.
The government committed to managing the IMF’s emergency financial assistance with full transparency and accountability.
Yet it has not done so.
The IMF’s most recent review of SA paints a worrying picture: subdued investment and exports, increased uncertainty, depressing growth and worsened social indicators.
Risks are materialising at state-owned enterprises (SOEs’); high fiscal deficits have boosted debt; nonresident investors are shedding equities and local currency bonds; inflation is expected to increase; the 30.1% unemployment rate is set to worsen; and the government cut its revenue projection by more than R300bn.
Back in February, the government said an additional R40bn in taxes needed to be raised over the next four years. But that was before the coronavirus came to town. Now, tax collections are lagging 23% compared to last year, and under lockdown the SA Revenue Service (Sars) has forfeited at least R82bn.
SA doesn’t just have a revenue problem, it has a spending problem. As economist Mike Schussler points out, government is spending nearly R50bn a month more than it collects in taxes.
We lost our economic sovereignty a long time ago
The ANC’s left and its alliance partners fear that accepting financing from the IMF would mean that we’d lose our “economic sovereignty”.
For most of the glory days at Sars, the organisation was keenly aware of the fact that it was not just collecting taxes – it was the axis on which our country’s sovereignty turned. The less Sars collected, the more the country had to borrow, and the more it had to borrow, the more it became beholden to its lenders.
But today, as Duncan Artus, chief investment officer at Allan Gray, recently pointed out, the cost of our 10-year government debt exceeds the growth in our economy.
The government has become little less than a delinquent ...