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Don't fall into an IMF debt trap Tito Mboweni! - political commentator

5 April 2020 10:49 AM
Tags:
SA Economy
Tito Mboweni
International Monetary Fund
bailout
COVID-19
Oscar van Heerden on the reasons he believes South Africa should not turn to the IMF for a general loan amid Covid-19 crisis.

"The IMF is already an infested, sick body that will give us far more diseases than the current Covid-19 virus."

That's a quote from Oscar van Heerden's article published by Daily Maverick, An IMF loan is a generational debt trap - don't do it Tito!

Finance Minister Tito Mboweni has indicated that he may have no choice but to approach the International Monetary Fund for a bailout to deal with an economic crisis amid the Covid-19 meltdown.

Van Heerden (international relations scholar and political commentator) says he's referencing the idea of a general loan in particular:

I think that even if it is couched in the language of a response to Covid-19 and our fight against this pandemic, the IMF and its history suggests to me that there will be certain conditionalities that they would attach to a loan. But if it is indeed what they refer to as a draw down amount, interest-free to assist specifically with this pandemic, then perhaps it's a different ballgame.

Oscar van Heerden, International relations scholar and political commentator

But I simply don't trust the IMF.

Oscar van Heerden, International relations scholar and political commentator

RELATED: Mboweni's plan to cut public wage bill must be followed by action - economist

Van Heerden has cautionary tales about the conditions the IMF attaches when third world and developing economies approach it with balance of payments problems.

The very structural reform that the minister of finance is referring to, these are: you have to cut your public sector wage bill, you have to cut the employees of the public sector. Usually in the affected areas of education and health, you also have to also make commitments to reining in expenditure on a number of fronts...

Oscar van Heerden, International relations scholar and political commentator

And what history has shown us, particularly in Africa, is you just fall into a debt trap where you try to comply with some of these things but at the end of the day you then have to borrow more in order to sustain that because you're still not generating the amount requested...

Oscar van Heerden, International relations scholar and political commentator

... before you know it you're in a cycle we call a debt cycle where you simply can't get out of it and the IMF begins to dictate what your policy choices should be, how you move forward and so on and so forth.

Oscar van Heerden, International relations scholar and political commentator

Van Heerden also discusses alternative loan sources for South Africa.

Listen to his argument below:


This article first appeared on CapeTalk : Don't fall into an IMF debt trap Tito Mboweni! - political commentator


5 April 2020 10:49 AM
Tags:
SA Economy
Tito Mboweni
International Monetary Fund
bailout
COVID-19

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