The International Monetary Fund (IMF) projects South Africa’s economy to shrink by 7.2%, attributed to growing debt repayments as a result of the negative impacts of the global COVID-19 pandemic that threatens to drive the economy into a deep recession.
The IMF says the recession would limit the government’s ability to reduce debt and a bulging fiscal deficit.
According to the IMF, the consolidated budget deficit will hit 16% of gross domestic product (GDP), with public debt hitting 78.1% of GDP in 2020 and 82.4% in 2021.
As CGTN reports, IMF says its projections were “subject to prominent downside risks”, citing increased bond issuance, social instability and bailouts to state-owned firms, especially power utility Eskom, as risks.
Yesterday, the Executive Board of the IMF approved South Africa’s request for emergency financial assistance of $4.287 billion. These funds, disbursed under the Rapid Financing Instrument (RFI), will meet South Africa’s urgent balance of payment (BOP) needs, arising from effects of the COVID-19 pandemic.