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Correcting misconceptions about the Government's resource commitment to the IMF
Pretoria: There seems to be a great deal of confusion about the reason for and the implications of South Africa’s commitment to support International Monetary Fund (IMF) resources. We would like to clarify as follows:
* “It’s a gift to the IMF”
In fact, initially this is simply a commitment to support the IMF if needed so it sits in our foreign reserves. If the IMF uses the funds, the money is lent to the IMF and not a gift. For all of this time the money will be earning interest for South Africa. The capital of the loan will ultimately be repaid to South Africa. It’s like lending money to a very strong bank. This is not a risky loan.
* “The money could be used more urgent purposes”
The funds used for this purpose are part of our foreign reserves. We need to hold reserves to keep our currency stable. They do not require an additional budgetary allocation.
* “The money does not help jobs in South Africa”
There is a real risk of global crisis today. If the global economy falls sharply, there is a serious risk that we will lose more jobs. In the last global recession we lost 1 million jobs. Our contribution to the IMF is intended to help stave off this kind of crisis happening again.
* “The money is for Europe”
The money is available for any member of the IMF that is in trouble, in Europe, in Africa or anywhere else. If South Africa needs help from the IMF, it could borrow much more than the $2 billion that we have set aside for the IMF resourcing.
* “Only developed countries should contribute to the IMF funds”
It’s not only developed countries that have contributed to the current funding exercise—countries like China and India have contributed too. China has a lower per capita income than South Africa and yet they have set aside $43 billion for this resourcing exercise. India is considerably poorer than South Africa and China, and yet they are allocating $10 billion. South Africa is allocating $2 billion.
Like China and India, South Africa is a responsible global citizen. We are in the G20 to support global stabilisation and growth. We need to continue to do our duty.