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Outcry from opposition after SA's Mboweni signals part of IMF loan could pay wages

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Outcry from opposition after SA's Mboweni signals part of IMF loan could pay wages

Finance Minister Tito Mboweni

23rd October 2020

By: African News Agency

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South Africa’s official opposition Democratic Alliance (DA) party on Friday condemned Finance Minister Tito Mboweni after he did not rule out the possibility of using part of a $4.3-billion International Monetary Fund (IMF) loan to pay public sector wages.

DA legislator and head of public enterprises Leon Schreiber had asked Mboweni in Parliament whether any portion of the money would go towards salaries, and if not, what mechanisms were in place to avoid the money being channelled in that direction.

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The IMF approved the loan in July to help South Africa mitigate the severe impact of the Covid-19 pandemic on its economy.

In a written response to Schreiber’s question, made available on Friday, Mboweni said the loan would not be earmarked specifically for the payment of salaries, but would form part of the national revenue fund to be used to support existing government programmes, “which could include salary payments”.

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“The loan is a special facility created for member countries experiencing emergencies. It is called a Rapid Financing Instrument and does not bear conditionalities, nor does it require the implementation of an IMF structural programme,” the finance minister said.

He conceded that countries receiving IMF emergency financing had committed to transparently utilising the money and issuing reports.

Schreiber said Mboweni appeared to have abandoned the position he took in his February budget presentation to rationalise the unsustainable public wage bill and was now “willing to use debt to finance salary payments to government employees”.

Mboweni told Parliament in his budget speech that he proposed cutting R160-billion from the public wage bill over the next three years as part of efforts to reduce a budget deficit expected to swell to 6.8 percent of gross domestic product in the 2020/21financial year.

“This sudden change by Mboweni from his avowed position of prudential public financial management to debt fuelled public spending is hardly surprising,” Schreiber said on Friday.

“It is now public knowledge that his economic reform crusade has been rejected outright by his Cabinet colleagues who have repeatedly shown a willingness to send South Africa over the fiscal cliff through unrestrained spending.”

He pointed out that for years international financial institutions, rating agencies, economists and even some in South Africa’s National Treasury itself had said the country’s public wage bill had become unsustainable and needed to be cut to prevent a budget blow out.

“Initially a strong proponent of this position, Mboweni now seems intent on appeasing the trade unions by acceding to their demands for additional spending on the public wage bill,” Schreiber added.

As Mboweni prepared to present the medium term budget policy statement next Wednesday, his failure to hold the line and defend the public purse from political interests in his ruling African National Congress (ANC) would have far reaching consequences on South Africa’s long term fiscal stability, the DA legislator warned.

Schreiber said his party, which has already written to the IMF to register its objection to Mboweni’s intention to spend another R10-billion on bailing struggling national airline South African Airways, would similarly inform the fund that the finance minister “has now decided to abuse the $4.3-billion loan to pay salary increases for ANC cadres”.

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