By Adedapo Adesanya
The African Development Bank (AfDB) has approved a $304 million loan, equivalent to 5 billion Rand, for the South African government to help it fight the COVID-19 pandemic and support its budget.
South Africa had plunged into a recession last year even before the outbreak of the COVID-19 started worsening its economy. In 2019, the country registered Gross Domestic Product (GDP) growth of 0.2 per cent, the lowest in a decade, and according to estimates, it could drop to the worst in 90 years in 2020.
Latest forecasts show that the second-largest economy in Africa will see its GDP shrink by at least 7 per cent this year in a worst-case scenario just as its budget deficit will expand around 15 per cent of its GDP.
The AfDB said in a statement that the loan was to protect lives and promote access to essential medical equipment, to protect livelihoods by preserving jobs, and also to support companies in the formal and informal economy.
“South Africa’s ability to respond to the pandemic has implications for neighbouring countries as well as the continent as a whole,” the bank said.
The loan falls under the bank’s $10 billion COVID-19 Response Facility and will finance South Africa’s COVID-19 Response Support Program, and represents the lender’s first-ever budget support to the country.
The operation is designed as a Crisis Response Budget Support Operation prepared following a request from the government of South Africa.
South Africa has also approached the International Monetary Fund for financial support in its fight against the coronavirus. The IMF is expected to consider its request next week.
The development bank of the BRICS (Brazil, Russia, India, China, South Africa) group of nations approved a $1 billion COVID-19 loan for South Africa earlier this year.
According to the statement, South Africa is ranked as the most prepared African country to deal with a pandemic, according to a Global Health Security (GHS) Index.
However, significant challenges remain in the public health sector, including underfunding and human resource shortages. While the private health sector is better equipped, it remains unaffordable to the majority of South Africans.
The COVID-19 outbreak is also likely to adversely affect the gains made in controlling other infectious diseases such as Tuberculosis and HIV/AIDS.
South Africa’s scaling up of mass testing has also put pressure on capacity at public sector laboratories, and concerns have been raised about the rising numbers of infections among health workers.
The country has the highest cases of the continent and is the fifth most affected nation globally with over 394,900 cases with almost 6,000 deaths.
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