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S. African gov’t to invest in IMF fund to prevent global economic crisis

20 June 2012 20:47 (UTC +04:00)

Baku-APA. The South African ruling African National Congress (ANC) on Wednesday lauded the government’ s decision to invest two billion dollars in the Crisis Fund of the International Monetary Fund (IMF), saying the loan would help prevent another global economic crisis, APA reports quoting Xinhua.

"We believe that South Africa, as a member of both the United Nations and the G20, has an obligation to join hands with the rest of the world in averting a repeat of the last global economic melt down in the 2008-2010," ANC National spokesperson Jackson Mthembu said.

At the just concluded G20 summit in Los Cabos, Mexico, President Jacob Zuma announced that his country would join other countries in contributing to the Crisis Fund which is part of an initiative to prevent global economic crisis that is threatening the world economy. The fund will serve as a backstop in the event of further deterioration in the Euro-zone situation.

"Our contribution together with the rest of the world countries will enable the IMF to intervene decisively using the Crisis Fund that has been established, in the imminent threat to the world economy," Mthembu said in a statement.

Grouping 188 countries, IMF works to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world.

The ANC said that if the world economy collapsed, triggered by the faltering of the American economy, its impact would engulf the entire world and no country would be spared.

As a result of the last world economic melt down, South Africa lost one million jobs and its job creation forecast had to be reviewed downwards and economic growth trajectory had to be equally revised downward, Mthembu said.

"It is therefore in our national interest that we invest in this initiative to prevent future reoccurrence. We believe that while this is an obligation confronting the world economy’s ills, it is also a secured investment owing to the credibility of the IMF and the interest it will earn for South Africa," Mthembu said.

Mthembu emphasized that the money is not a donation to the IMF and that South Africa is of no capacity to donate cash to the IMF.

"This is an important point to make that this is not a donations as developing countries are not expected to donate to the IMF and therefore this remains a loan to be repaid to South Africa and the South African people as a whole," he said.

Announcing the move on Tuesday, the South African presidency said the funds would come from the country’s foreign reserves and would be drawn down only if they are needed and only after other resources have been depleted.

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

"We believe that as we want to transform the world multilateral fora including the IMF, WTO and the United Nations, we cannot do so on the basis of claiming ’poverty’. Our working together with the world to intervene in future economic crisis will put us, as a country, in a better position to advance our transformation objectives within the international community," Mthembu said.