SA’s R11-billion loan from the World Bank will come at lending rate of 0.8%, according to the latest information published on the bank’s website.
The loan must be repaid within 10 years, with no debt repayments necessary for the first three years.
Finance Minister Enoch Godongwana told MPs on Tuesday that a key motivation behind obtaining the loan was the cost, and estimated that the rate was 300 basis points – or 3 percentage points – below what it would cost the country to raise dollars in the market.
Godongwana and Treasury officials were briefing parliament’s standing committee on finance on the rationale for the loan and the conditions attached. Government has until now mostly avoided borrowing from the World Bank, due to political concerns among the ANC and its allies that the bank would impose conditions that would encroach on SA’s policy sovereignty.
Godongwana stressed that there were no conditions attached to the R11 billion and that it had been awarded on the basis of SA’s fiscal response to the Covid-19 pandemic and the country’s aspirations to build a more inclusive economy through structural reforms. The loan is for general budget support and not earmarked for any specific project or budget item.
SA needs to raise R470 billion in 2021/22 to fund the deficit and service and repay existing debt. In 2020/21, the borrowing requirement was R600 billion.
“We go to the markets every year to raise billions. R11 billion in the scheme of things is small. Was the loan necessary? As we must go to the market the need and the rationale is clear.
“Why the World Bank? The rate was 300 basis points below what we estimate we will get in the market. It was cheaper for us. There is repayment holiday of three years and we start repaying in the fourth.”
Director general of the Treasury Dondo Mogajane said that SA was open to engaging with international finance institutions “so long as the conditions do not impact on the sovereignty of the state”.
“That is a principle of our engagement. No one is going to dictate to us what the macro economic stance of the country should be,” he said.
Head of asset and liability management in the treasury Duncan Pieterse reminded MPs that Treasury’s borrowing plans had been outlined in the budget. The plan included borrowing $5.3 billion in 2021/22. In addition to the World Bank loan amount of $1.5 billion had been raised from the New Development Bank. The rest would be raised from the market at a far higher rate, he said.
EFF deputy leader Floyd Shivambu motivated to the committee that parliament reject the World Bank loan, a decision that was not endorsed by others.
Original story on News24