IMF cautions SA government about SAA loan

The International Monetary Fund has warned the government to weigh funding for struggling parastatals like SAA against the need for spending to stimulate growth and alleviate poverty.

This was contained in an IMF letter to the DA. 

“With respect to financial support to South African Airways, as we have noted in the past, subsidies to persistently loss-making state-owned enterprises, as elsewhere, need to be weighed against alternative uses of scarce public resources, including investments in alternative growth-enhancing and/or poverty-reducing investments,” IMF executive director Kristalina Georgieva wrote.

Her letter, dated October 2, was a response to one from DA MP Geordin Hill-Lewis red-flagging the government’s plans to commit funding in the order of R10bn to the initial stages of SAA’s business rescue process.

The money is expected to be made available in the medium-term budget policy statement (MTBPS) later this month because no funding was forthcoming from private investors and commercial banks.

Hill-Lewis published the letter a day after Finance Minister Tito Mboweni asked Parliament to allow him to postpone the MTBPS by one week to October 28 in a move that may not be unrelated to the wrangling over a lifeline for the national carrier.

The IMF in July approved a R70bn low-interest loan to South Africa to help the country weather the financial impact of the Covid-19 pandemic.

Mboweni at the time said he expected the World Bank to sign off on a loan to South Africa soon thereafter.

But it has been reported that talks with the World Bank on a further lending facility of US$2 billion have stalled.

National Treasury on Wednesday would not comment on progress in the negotiations.

“The World Bank loan is being negotiated and the outcome thereof will be announced.”

In his letter to the Speaker of Parliament, the finance minister cited the “complex and unusual circumstances visited upon us by the Covid-19 pandemic” and said the National Treasury has had to adjust its approach to the budgetary process accordingly.

“The government is determined to maintain a prudent fiscal stance which is in the best interest of the country in the medium and long term. The 2020 MTBPS will reflect this position.”

This came just hours after Public Enterprises Minister Pravin Gordhan postponed a briefing to Parliament’s watchdog Standing Committee on Public Accounts (Scopa) on SAA.

Gordhan, clearly unaware of Mboweni’s move, asked that the meeting be postponed till after October 26 to allow the MTBPS to take place and funding to be allocated to the airline.

While Gordhan has been a tireless advocate of rescuing SAA, Mboweni is on record as being reluctant to pour more money into a company that last made a profit in 2011.

SAA ceased operations at the end of September until such time that funding was forthcoming.

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