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The International Monetary Fund (IMF) said on Monday that its Executive Board has approved South Africa’s request for emergency financial assistance to the tune of $4.3 billion. The amount is the equivalent of 100 per cent of the country's assigned IMF quota of 3,051.2 million Special Drawing Rights (SDRs).

The facility – which would be drawn from the financial institution’s Rapid Financing Instrument (RFI) – would enable South Africa to meet its urgent balance of payment (BOP) needs arising from the outbreak of the COVID-19 pandemic. South Africa is the hardest-hit country by the virus in Africa, accounting for over 450,000 infections and more than 7,000 deaths as of Tuesday.

The IMF has estimated South Africa's gross domestic product (GDP) to contract by 8.0 per cent in 2020, owing to the severe economic impact of COVID-19. Apart from the effects of the pandemic, the country has been faced with severe structural constraints to growth over the last decade, resulting in high unemployment, poverty, and income inequality, according to the IMF.

“The emergency financing under the RFI will help fill the urgent BOP needs that emerged as a result of the pandemic and thus contain the economic disruption and its regional spillovers," said Geoffrey Okamoto, IMF's First Deputy Managing Director. "The RFI will also help catalyze other disbursements."

According to Reuters, South Africa plans to borrow about $7 billion from international financial institutions to cushion the economic impact of the pandemic and help struggling businesses and households. Of that $7 billion, the New Development Bank of the BRICS group of nations – of which South Africa is a member – has already approved a $1 billion loan for the country. Last week, South Africa secured about $304.6 million from the African Development Bank (AfDB) to support the country's fiscal response to COVID-19.

“Going forward, our fiscal measures will build on our policy strengths and limit the existing economic vulnerabilities which have been exacerbated by the COVID-19 pandemic,” said Tito Mboweni, South African Minister of Finance, in a statement after the IMF announcement.

The approved IMF loan for South Africa is higher than the $3.4 billion loan the global financial institution approved for Nigeria in April to fight Covid-19. Nigeria's IMF loan was also the equivalent of 100 per cent of the country's assigned IMF quota of 2,454.5 million SDRs.