Author: Peter Fabricius, Daily Maverick
But the reforms that the IMF would impose as conditions for the loan would save the economy, says Peter Leon.
South Africa will probably have to go back to the IMF for a much bigger loan than it has just got and this would come with conditions such as deep structural reforms to the economy.
These reforms would, however, be the “silver lining” on the immense fiscal crisis which the country now faces, exacerbated by the coronavirus pandemic, said Peter Leon, senior partner and co-chair of the African group at the law firm Herbert Smith Freehills.
Author: PETER LEON
Short-term relief will not be enough if the government does not jolt the economy into life with breathtaking reforms.
It will be many months before we are able to assess the extent to which the Covid-19 pandemic has damaged the global economy. An unprecedented supply and demand shock has already led to a projected 16% unemployment rate in the US, the world’s biggest economy, with 26-million unemployment claims last week alone. This is four-and-a-half times more than the February 2020 unemployment rate. If this continues, the US unemployment rate will reach levels not seen since the Great Depression in 1934.
The International Monetary Fund (IMF) believes the global economy will contract 3% in 2020 — the worst global recession since the Great Depression. Dramatic reductions in supply and demand, falling commodity prices, outward capital flows and declining global growth all contribute to this. The fragility of many economies is evident, with developing countries suffering from an unhappy combination of a health, financial and fiscal crisis. SA is no exception.