LETTER: IMF loan a recipe for disaster
Easy money can easily lead to a debt trap from which a country never escapes
SA has relatively low debt levels and we are a resource-rich country, so why are we taking a $3bn loan from the IMF? We should rather raise that money in rand instead of dollar-denominated debt.
Where the IMF goes trouble often follows. It is quick to give loans, but when payback time comes and the country can’t afford it the fund demands austerity measures, such as cutting social security to bail the country out.
Taking loans that must be paid back in dollars is a recipe for disaster. What happens if the exchange rate goes against us? It would be better to raise money payable back in rand whatever the exchange rate, even if the interest is slightly higher. Then there is also a reality check of what the market considers the payback prospects to be. Easy money from the IMF can easily lead to a debt trap from which a country never escapes.
Jeremy Gordon, Sea Point
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