Reports that South Africa is turning to the international monetary fund, IMF for a $4.2bn loan means that all of Africa’s top economies have sought emergency bail out from the fund, reversing age long animosity in the continent.
Nigeria, Africa’s largest economy first jumped on the IMP bandwagon, receiving a badly needed credit support of $3.4bn and it has been followed by the third largest economy, Egypt which has now got approval for a whopping $5.2bn standby facility from the fund.
The IMF support for Nigeria was of immediate help to an economy that was reeling, helping to provide strong support for the country’s foreign reserves which rose to $36.6bn upon disbursement of the credit, the first time the reserve level rose since May of 2019.
In Egypt, news of the IMF deal has sent equities higher in a country that has seen significant capital flows over the last three years.
While the IMF has taken steps over the years to burnish its image in Africa, animosity towards it persisted on the continent until the current coronavirus crisis which bore holes in economies around the continent.
That economic calamity of the coronavirus is credited with breaking South Africa’s resistance to borrowing from the International Monetary Fund. South Africa is the continent’s second largest economy.
And now some allies of President Cyril Ramaphosa and his ruling African National Congress worry that the $4.2 billion loan his government is negotiating with the Washington-based agency marks the first step toward a slippery slope of submission.
“This is a precursor because Cyril’s government doesn’t have the resources,” said Lumkile Mondi, economics lecturer at Johannesburg’s University of the Witwatersrand.
“This is just to soften the alliance partners in preparation for a much bigger ask.”
