South Africa mutes maiden IMF bailout as economy implodes

Tito Mboweni

CAPE TOWN (Reuters) – South African Finance Minister Tito Mboweni said on Thursday that the country had to act swiftly on its debt levels to avoid turning to the International Monetary Fund for help.

“Whether or not you like the IMF, ideologically or practically, it doesn’t matter. When you get into a debt trap that’s where you end up,” Mboweni told lawmakers a day after delivering a bleak medium-term budget statement.

“That low economic scenario has reduced tax revenues. We clearly have a problem,” Mboweni added.

South African government bonds fell sharply and the rand tumbled early on Thursday, extending losses from the previous session after Finance Minister Tito Mboweni’s medium-term budget forecast weak growth and wider deficits.

At 0610 GMT, the yield on the rand-denominated benchmark 2026 bond was up 16.5 basis points at 9.465 percent. That compares to a yield of 9.135 percent before Mboweni’s speech.

The rand was 0.5 percent weaker on the day at 14.6200 versus the dollar.

Mboweni, a former central banker, raised the deficit estimate for the 2018/19 fiscal year to 4 percent of gross domestic product while halving the growth forecast for this year to 0.7 percent.

Investors are skittish as Africa’s most industrialised economy struggles with rising debt, which risks stripping the country of its last investment grade credit rating.

President Cyril Ramaphosa has made reviving economic growth a priority since replacing scandal-plagued Jacob Zuma in February, but he has been frustrated by infighting in the ruling African National Congress and severe fiscal constraints.

Ramaphosa will court investors at a three-day investment summit starting on Thursday, where he will be looking for new pledges to meet his target of $100 billion of new investments over the next five years.