Johannesburg – The World Bank has told South Africa’s government it has to cut its wage bill to qualify for a loan of as much as $2 billion and agree the money won’t be used to bail out insolvent state companies, said a person familiar with the situation.
Those conditions have stalled negotiations on the loan that started in April, said the person. The World Bank said it will only comment should an agreement be reached. South Africa’s National Treasury has not responded to requests for comment.
This year, South Africa has turned to multilateral lenders for the first time since the end of apartheid, overcoming political opposition from within the ruling party, as it attempts to kick-start an economy forecast to contrast the most in nine decades.
Minister of Finance Tito Mboweni is expected to outline plans to fund a revival in output when he presents the medium-term budget on Wednesday and is under pressure to earmark more money to bail out state companies.
South Africa has borrowed $1 billion from the New Development Bank, the lending arm of BRICS group of nations, $4.3 billion from the International Monetary Fund, R5 billion ($310 million) from the African Development Bank and $50 million from the World Bank.
All these were deemed as emergency loans to combat the immediate impact of the coronavirus outbreak.