South Africa does not need an IMF bailout – Dawie Roodt

Author and political scientist RW Johnson has predicted that South Africa will eventually be forced to go to the IMF and ask for a loan. Several other analysts have also supported this idea, but this lender of last resort has been described as a brutal loan shark by countries who were forced to go to an IMF bailout. Asking for a loan comes with strings attached; countries have to apply painful structural adjustment programmes. So, is this what South Africa would be forced to do if it does not get the spiralling debt of Eskom and the other state-owned enterprises under control? Chief Economist of the Efficient Group, Dawie Roodt told Biznews in an interview that South Africa did not need an IMF loan, but it could be an option if a desperate Finance Minister wanted to enforce much-needed structural change in South Africa. – Linda van Tilburg

Roodt said the simple answer to the question of whether South Africa needed an IMF bailout was, "No". He said the only reason why a country would approach the IMF to borrow money was when it was suffering from a balance of payments problem, when a country does not enough have foreign currency to pay for imports. Another reason why the IMF would be approached for a loan, was for the import of goods from abroad; in the case of a famine a country without sufficient foreign reserves would approach the IMF and ask for a loan to buy food.

Roodt said it had to be kept in mind that the IMF was normally approached to borrow dollars, but the South African economy did not need dollars, it needed Rands which it could simply create if needed. It would not make sense to go outside of the country and borrow dollars. It had to be kept in mind that an IMF loan could not be used to pay government employers salaries.

There was an instance where Roodt thought that South Africa could approach the IMF and that would be for a political reason; using it as a stick or as a motivation to get difficult policy decisions through. He said the Minister of Finance could use an IMF loan as an excuse to restructure the civil service in South Africa. "There are simply too many civil servants that are being paid by the state. "And the Minister of Finance could use the IMF as an excuse to force through structural adjustment. In this case "an IMF loan could come in handy."

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