(Adds details, background)
JOHANNESBURG, March 29 (Reuters) – South Africa would only consider approaching international agencies such as the International Monetary Fund (IMF) for emergency funding as a last resort to help in the country’s fight against the coronavirus, the finance minister said on Sunday.
South Africa entered a 21-day lockdown on Friday with people restricted to their homes and most businesses shuttered. The country has reported more than 1,180 cases of coronavirus, but no deaths, and now faces a near certain deep recession.
“If we approach the IMF or the World Bank or the Development Bank, it would be only if we run out of finance for health interventions. That’s all,” Finance Minister Tito Mboweni said in a teleconference. “Our first port of call would be the World Bank.”
Approaching multilateral institutions for cash, especially the IMF, has long been unpopular with the government, with such a move strongly opposed by the radical faction of the ruling party as well as its large trade union allies.
The government, including Mboweni, has also expressed reservations about approaching the IMF for fiscal support, pointing to stringent spending controls the fund would be likely to impose on the country.
That would threaten South Africa’s welfare system which is among the world’s largest and a key factor behind the African National Congress’s electoral dominance.
On Friday, Moody’s cut South Africa’s debt rating to below investment grade, meaning all three of the big credit ratings agencies rank the country at junk. This is likely to trigger capital outflows of as much as $12 billion.
Central bank governor Lesetja Kganyago, speaking on the same teleconference, said there would be no need to impose capital controls to limit an anticipated heavy selloff of the rand and local bonds following the downgrade.
A government official said the Treasury had spoken with ratings agency Fitch in the past week. Fitch and S&P Global Ratings, which already rank South Africa at junk, are due to deliver credit reviews in the next few months.
The official said Fitch expressed concerns about rising debt, above 60% of GDP, as well as limited funds the government had to respond to the virus, asking whether the Treasury would be approaching the IMF for bridge finance. (Reporting by Mfuneko Toyana; Editing by Andrew Cawthorne and Jane Merriman)