Cape Town – The government has once again been criticised over the International Monetary Fund loan of R70 billion – despite facing serious financial problems.
The EFF said on Wednesday it was not rational for the government to secure this loan when it was already paying more than double on its debt.
Government debt has reached R4 trillion and it pays R200bn a year to service the debt. The debt service cost is one of the largest expenditure items in the budget.
However, Deputy Minister of Finance David Masondo said the IMF loan was rational as it came at a time the government needed to fight the spread of Covid-19.
But EFF deputy leader Floyd Shivambu said there was no reason for the government to go to the IMF.
“In your budget you have R200bn to service debt and you borrow R100bn. Where is the rationality of borrowing when you have huge debt service obligations,” asked Shivambu.
But Masondo said this was the most rational decision they had taken under the circumstances. He said the terms of the IMF loan were better compared to other international and domestic lenders.
Masondo said they would have to repay the loan within five years.
“The purpose to borrow money was not to service debt but to buy PPE,” said Masondo.
“This facility was meant for Covid-19-related activities. We are aware of the risk and the exchange rate,” said Masondo, adding that if the rand continued to lose value against the dollar and other major currencies, they would have to pay more on the loan.