The African Development Bank (AFB) said today, its board of directors had approved a loan of $288 million (R4.7 billion) to the government of South Africa to shore up the fiscus as the country battles COVID-19.
The bank in a statement said the loan falls under its $10 billion COVID-19 Response Facility and will finance South Africa’s COVID-19 Response Support Program, and represents the Bank’s first ever budget support for South Africa.
“South Africa’s ability to respond to the pandemic has implications for neighbouring countries as well as the continent as a whole, given its position as Africa’s second-largest economy after Nigeria,” the AFB statement reads.
“Even before the pandemic, South Africa was experiencing an economic slump. In 2019, the country registered GDP growth of 0.2% – the lowest in a decade – and according to Bank estimates it could drop to the worst in 90 years in 2020. Projections show a GDP contraction of 6.3% and 7.5% under baseline and worst-case scenarios, respectively.”
South Africa is the epicentre of the deadly COVID-19 virus on the continent and is in the top 10 countries with most confirmed cases. At last count, the country had more than 380 000 confirmed cases and over 5000 deaths.
National Treasury is yet to confirm the loan. The government will need to borrow $7 billion from international finance institutions as one of the measures to cover the budget hole brought about by South Africa’s response to COVID-19, Finance Minister Tito Mboweni said last month during his supplementary budget.
New Development Bank – formerly the BRICS Bank – has already approved a $1 billion Emergency Assistance Program Loan to South Africa.
The country’s economy is set for a bumpy ride in the foreseeable future with the South African Reserve Bank expecting growth to plunge by more than 7% this year due to COVID-19.
