Finance Minister Enoch Godongwana has defended the controversial R11 billion loan South Africa received from the World Bank. Following the approval of the loan, it had everyone talking and stirred a lot of controversies all around.
It was said that the loan was crucial for the state of the economy. However, many felt that a loan of that amount was unnecessary. Many questions arose amongst political parties as to how the money is going to be utilized and how the government is going to pay back the money, as it is one significant debt for the country.
Minister Godongwana has now explained how this loan will be beneficial to all citizens and the government at large, insisting that the loan comes with no conditions put in place by the World Bank.
“When we table the Budget in Parliament, we say a couple of things. We say this is the revenue we are likely to raise and we then say this is the expenditure we are going to incur as a nation.
“There is always a difference between those two, which we call the deficit. We go to the market and raise money every year for three things. The first one is to raise money to fund that deficit between the expenditure and revenue. It’s one component of what we borrow. The second component of what we borrow is debt-service costs. The third component of what we borrow is the redemptions,” he said.
Godongwana added by saying that the loan will be useful in reclaiming the gap between revenue and expenditure and that it will also assist the government in terms of responding to the COVID-19 pandemic at large to protect livelihoods.
The loan will assist in addressing both financial and health challenges that the country is currently facing as well as improving the economy. According to the minister, the loan is within the country’s budget.
He also made it clear that strategic arrangements will be made in order to pay it back which include the National Treasure in raising funds that will allow them to settle this debt.
With the increasing debts that the country is facing, many are yet to see if this loan will be beneficial or if it is going to cause havoc.
