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Motlanthe: Loan to IMF in SA interest

Aug 15 2012 18:45 Sapa

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Cape Town - South Africa's commitment of a $2bn loan to the International Monetary Fund (IMF) crisis fund was in the national interest, Deputy President Kgalema Motlanthe said on Wednesday.

Responding to questions in the National Assembly, he said the commitment that the IMF secured from some of its members at the G20 leaders summit in Mexico in June to increase its resources by $456bn, was intended to create contingency funding in the event of further deterioration in the global economic situation.

The funds could be used by any of the members of the IMF to stave off the risk of another financial crisis.

South Africa's commitment to contributing $2bn to the fund was informed by the need to promote global financial stability and prevent a downturn in the global economy, which would have adverse consequences for South Africa's growth and employment prospects, given its trade and financial exposure to the Eurozone and global markets.

"Thus, it is in our national interest to strengthen IMF resources," he said.

The funds used for this purpose would be considered part of South Africa's foreign reserves.

The funds would be invested and earn interest, and would only be drawn down in emergency circumstances.

If the funds were drawn down, they would ultimately be repaid and would continue to earn interest over this period.

South Africa's commitment was intended to promote global economic policy co-ordination and co-operation, Motlanthe said.

"South Africa's participation in this resourcing exercise anticipates that all the quota and voting reforms agreed upon in 2010 will be implemented in a timely manner."

Thus, South Africa's resource commitment was intended to promote reforms in the governance of the IMF in particular, and of international financial institutions in general.

South Africa's contribution was part of $75bn committed by the BRICS (Brazil, Russia, India, China, and SA) grouping and was intended to enhance peer leadership among this group of developing nations.

The relative contributions per country were Brazil $10bn, Russia $10bn, India $10bn, China $43bn, and South Africa $2bn.

"The resource commitment by South Africa and the other BRICS members, in anticipation of the implementation of the 2010 International Monetary Fund reform agreement, will strengthen their leadership in advocating for the reform of the governance of the IMF," Motlanthe said.

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