International financial institution lending: Problems and solutions

The document examines the risks associated with South Africa's increasing reliance on IFI loans, particularly for climate finance under the Just Energy Transition Partnership (JET-P). It highlights a lack of transparency and parliamentary oversight, noting that loan conditionalities can undermine constitutional rights and sovereignty. The authors propose a five-step approval procedure involving sustainability, human rights, development, and sovereignty assessments, alongside a public consultation and majority vote in the National Assembly.

• South Africa has significantly increased its borrowing from International Financial Institutions (IFIs), totaling over R211.7 billion between 2020/21 and 2023/24, with similar amounts planned for 2024/25 to 2026/27.
• The National Treasury has been accused of misleading the public regarding loan conditions; for example, it claimed a 2022 World Bank loan had no conditions, while the agreement actually included a list of policies the country agreed to pursue.
• Climate finance under the Just Energy Transition Partnership (JET-P) is heavily reliant on IFI loans, with National Treasury planning to raise US$14.6 billion (R267.7 billion) from IFIs for this purpose between 2025 and 2028.
• IFI loans in South Africa carry significant financial risks due to variable interest rates and currency volatility. For instance, the Euribor rate increase since 2022 could cost the government roughly R6.5 billion more over the duration of two JET-P loans.
• There is a lack of transparency and accountability in the current borrowing process, as JET-P IFI loans were not tabled before Parliament or NEDLAC, and some terms were only uncovered via Promotion of Access to Information Act (PAIA) requests.
• Policy conditionalities attached to IFI loans can create a 'policy lock-in' that restricts the ability of a democratically elected government to change direction, potentially conflicting with constitutional duties or national policy.
• The current legal framework, specifically the Public Finance Management Act (PFMA), provides the Minister of Finance with unfettered discretion to authorize loan agreements, which results in a process monopolized by the National Treasury.
• The authors recommend a five-step procedure for all future loans: a debt sustainability analysis, a human rights, gender, and environmental impact assessment, a development assessment, a national sovereignty report, and a public consultation followed by a majority vote.
• Case studies of Argentina, Mozambique, and Zambia show that while these countries have codified borrowing rules in their constitutions, they have all faced debt defaults, highlighting that legal frameworks alone are insufficient without strong auditing and judicial enforcement.

APA

Mdutyana, L., Ramburuth, K., & Makoga, S. W. (2025). International financial institution lending: Problems and solutions. Institute for Economic Justice. https://iej.org.za/wp-content/uploads/2025/06/IEJ-policybrief-IFILending-1.pdf

Chicago

Mdutyana, Liso, Kamal Ramburuth, and Shikwane Warren Makoga. International financial institution lending: Problems and solutions. Institute for Economic Justice, 2025. https://iej.org.za/wp-content/uploads/2025/06/IEJ-policybrief-IFILending-1.pdf.

Wikipedia

{{cite report |last1=Mdutyana |first1=Liso |last2=Ramburuth |first2=Kamal |last3=Makoga |first3=Shikwane Warren |title=International financial institution lending: Problems and solutions |publisher=Institute for Economic Justice |date=June 2025 |url=https://iej.org.za/wp-content/uploads/2025/06/IEJ-policybrief-IFILending-1.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{mdutyana2025international, author = {Mdutyana, Liso and Ramburuth, Kamal and Makoga, Shikwane Warren}, title = {{International financial institution lending: Problems and solutions}}, institution = {Institute for Economic Justice}, year = {2025}, month = jun, url = {https://iej.org.za/wp-content/uploads/2025/06/IEJ-policybrief-IFILending-1.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }