The South African rand. Picture: REUTERS
The South African rand. Picture: REUTERS

The New Development Bank announced on Saturday that it had approved a $1bn (R17.3bn) emergency Covid-19 loan for SA.

The announcement comes four days before finance minister Tito Mboweni tables a supplementary budget to parliament, which will adjust both spending and revenue plans and update key forecasts on growth and debt.

The demands for additional spending on health and welfare have increased due to the crisis, and the dramatic drop in revenue has increased the government’s borrowing requirement. The budget deficit, according to a document presented by the Treasury to Nedlac on Friday, could increase to more than -14%, more than double than what was anticipated in February.

Mboweni has also said that SA will apply for it full drawing rights quota with the International Monetary Fund (IMF), which amounts to $4.2bn. It is expected that the IMF board will make a decision on the loan in July. An application has also been made to the World Bank a loan of some $50m.

“The Covid-19 Emergency Programme Loan to SA will be provided in response to the urgent request and immediate financing needs of the SA government. NDB’s assistance will address urgent health needs in SA to overcome the Covid-19 pandemic and help mitigate socioeconomic effects on the most vulnerable populations,” said Xian Zhu, NDB vice-president and COO.

The founder members of the NDB — dubbed the Brics countries — were all entitled to a $1bn loan immediately. Xian Zhu said that similar loans had also been provided to China and India.

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