Treasury should provide clarity on the World Bank loan 

21 January 2022

The DA calls on National Treasury to provide clarity on the conditions that were attached to the recently announced R11,4 billion loan extended to South Africa by the World Bank.

In the absence of a loan programme document from the World Bank or an explanatory note from Treasury, South Africans have no way of knowing the purpose of the loan and the associated repayment terms.

South Africa has a substantial national debt burden, with the country currently spending R303 billion annually to service debt. We therefore cannot afford to take on additional debt with no plan to boost economic growth.

With the debt to GDP ratio currently standing at over 70%, South Africa faces the real risk of falling into a debt spiral that can trigger a sovereign debt crisis. It is therefore important that the government holds the fiscal line and does not increase the country’s debt exposure.

At the very least, Minister of Finance, Enoch Gondongwana, will need to clarify how this World Bank loan will be spent and repaid. The current debt level is already crowding out service delivery to the most vulnerable members of society and accruing debt for consumption will result in stagnation at best.

The prospect of getting ensnared in a debt trap is a looming reality for South Africa. More debt will not solve South Africa’s economic challenges. Resolving incoherent economic policy and addressing staggering levels of corruption is required. Pragmatic economic policy is needed to attract investment capital to accelerate economic growth.

Issued by Dion George, DA Shadow Deputy Minister of Finance, 21 January 2022