South Africa seeks World Bank loan for second time since 1994

(Bloomberg) — The South African government is in talks with the World Bank for additional funding, according to people familiar with the talks.

The state is seeking at least $800 million as it considers ways to fund the likely extension of a Covid-19 relief grant set to expire in March, said the people who asked not to be identified because that they are not allowed to speak to the media.

South Africa last week secured its first budget support from the World Bank since the end of apartheid a quarter of a century ago. The low-interest $750 million loan is being used to offset the impact of the coronavirus pandemic, which has killed more than 94,000 people and caused the deepest economic contraction in nearly three decades in 2020.

Read: World Bank grants $750m loan to South Africa

Since the onset of Covid-19, South Africa has sought concessional loans from multilateral lenders, including the International Monetary Fund and the New Development Bank, to help offset virus-induced damage.

The government will continue to explore all available options, including low interest loans from multilateral institutions, to reduce the cost of its debt and preliminary talks with the World Bank have taken place under the auspices of a framework partnership with the country, the National Treasury said in an email response to questions. He wouldn’t say how much he’s asking for or how the funds would be used.

“Diversifying our funding sources is an important mechanism to improve South Africa’s debt sustainability, reduce the cost of funding and improve our macro-fiscal position,” he said.

The Treasury in November estimated that debt would reach 4.31 trillion rand ($276 billion), or 69.9% of gross domestic product, in the current fiscal year. Soaring loan servicing costs, the fastest growing budget line since 2011, pose a major risk to South Africa’s fiscal sustainability as the continued damage from the virus compounds the deterioration in public finances. caused by years of overspending, mismanagement and alleged corruption.

Discussions under the Country Partnership Program, which was developed with the South African government and aims to promote investment and job creation, are ongoing, a Bank spokesperson said. worldwide in a separate email response to questions. The Treasury will announce the outcome of the loan talks, the spokesperson said.

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