Cape Town - Finance Minister Tito Mboweni on Wednesday described talks with the International Monetary Fund (IMF) for a loan to shore up South Africa's public finances in the face of the Covid-19 crisis as "difficult".
"The IMF and the National Treasury have been involved in quite a protracted negotiations process. The discussion are tough, they are difficult," Mboweni told a media briefing immediately after he tabled a special adjustment budget to revise state spending in response to the ongoing health crisis.
"We think we may have come to some common understanding and on the basis of this the staff at the IMF will approach their executive board in early July," he added.
Mboweni said so far, the only international loan firmly in hand was US$1 billion extended by the New Development Bank.
South Africa is seeking US$4.2 from the IMF.
However, once there was an agreement with the IMF, he expected that "the World Bank will follow suit".
Mboweni, who warned in his speech of a looming debt crisis, said he needed to stress that the funding secured from international organisations was "borrowing which means that they have to be repaid at some point with the requisite interest".
He pointed out that in an ideal economic environment, such loans would be leveraged strictly for investment spending by the state.
"It is important because what we are trying to prevent is a very difficult financial situation," he said.
Mboweni announced in his speech that the government would move to an approach of zero-based budgeting to avoid a sovereign debt crisis. Debt was forecast to reach 81.8 percent of GDP in the current financial year before stabilising at 87.4 percent in 2023/24.
"Our early projection is that gross national debt will be close to R4 trillion, or 81.8 per cent of GDP by the end of this
fiscal year. This is compared to an estimate of R3.56 trillion or 65.6 per cent of GDP projected in February."