South Africa is set to receive a $750 million (around R11.4 billion) loan from the World Bank to aid its COVID-19 response and economic recovery.
In statement on Friday (21 January), the National Treasury said the World Bank Group Board of Executive Directors had approved the development policy loan (DPL) earlier in the day.
World Bank loan to South Africa
“This loan will support the Government of South Africa’s efforts to accelerate its COVID-19 response aimed at protecting the poor and vulnerable from the adverse socio-economic impacts of the pandemic and supporting a resilient and sustainable economic recovery,” the National Treasury said.
“The DPL supports the implementation of South Africa’s Economic Reconstruction and Recovery Plan (ERRP) and is well aligned with the World Bank’s Crisis Response Approach aimed at protecting lives, livelihoods and supporting a more inclusive and resilient growth path.”
This is the latest in a series of COVID-19-related loans to South Africa from various international finance institutions. In 2020, the International Monetary Fund (IMF) granted the country a $4.3 billion (approximately R70 billion at the time).
The African Development Bank (ADB) granted a further $288 million (R5 billion at the time) loan in 2020.
This was followed by two loans of $1 billion each from the New Development Bank (NDB) in April and June 2021, respectively. The NDB is affiliated to the Brazil, Russia, India, China and South Africa (BRICS) formation.
According to National Treasury Director-General Dondo Mogajane, the new “low-interest” loan will “contribute towards addressing the financing gap stemming from additional spending in response to the COVID-19 crisis.”
He added, “It will assist in addressing the immediate challenge of financing critical health and social safety net programs whilst also continuing to develop our economic reform agenda to build back better.”
For her part, World Bank Country Director for South Africa Marie Françoise Marie Nelly said the DPL will provide relief to South Africa, which last year suffered its worst economic contraction in 90 years.
“This support aims to put the country on a more resilient and inclusive growth path by leveraging South Africa’s strength to mitigate the effects of the COVID-19 crisis through their strong social safety net and by advancing critical economic reforms,” she added.
In addition to its normal grant system, South Africa introduced the COVID-19 social relief of distress grant in 2020 to augment its social safety net.