World Bank’s ’insistence’ SA government commit to not bailing out SOEs welcomed
Cape Town – The Democratic Alliance (DA) has welcomed the World Bank’s insistence that the government commit to not bailing out insolvent state-owned entities (SOEs) using the $2 billion standard loan facility it has applied for, as well as to cutting the public wage bill.
In a statement on Tuesday, the DA said the ’’World Bank’s insistence on these obvious reforms is a clear warning to the ANC government: get public spending under control now, or face difficulty in borrowing money globally’’.
Finance Minister Tito Mboweni is expected to outline plans to fund a revival in output when he presents the medium-term budget on Wednesday and is under pressure to earmark more money to bail out state companies.
The DA called for Mboweni to refuse any further public bailout of SAA.
’’Such a bailout would be immoral, given the urgent social priorities in South Africa right now, and the need to bring debt under control,“ the DA said.
’’It was inevitable that international lenders would begin to lose patience with the ANC’s unacceptably slow progress on needed structural economic reforms.’
’’The World Bank has already shown good faith to South Africa by extending a $50 million unconditional emergency loan.
’’We urge National Treasury to heed the request of the World Bank if it is serious about both qualifying for the loan as well as effecting the urgent structural reforms that are necessary to revitalise the economy.’’
Bloomberg reported that the World Bank’s conditions have stalled negotiations on the loan that began in April, a source said, asking not to be identified. The World Bank said it will only comment if an agreement is reached.
South Africa’s National Treasury didn’t respond to requests for comment.
South Africa this year has turned to multilateral lenders for the first time since the end of apartheid, overcoming political opposition from within the ruling party, as it tries to kick-start an economy forecast to contract the most in nine decades.
So far the country has borrowed $1 billion from the New Development Bank, the lending arm of the BRICS group of nations, $4.3 billion from the International Monetary Fund, R5 billion ($310 million) from the African Development Bank and $50 million from the World Bank.
All of those were deemed as emergency loans to combat the immediate impact of the coronavirus outbreak. The additional World Bank loan is a standard borrowing facility and therefore may carry more conditions.