South Africa today applied for a $1.07 billion loan from the International Monetary Fund, a month after denying reports that it intended to do so.
Finance Minister Owen Horwood announced the loan application at a press conference in Pretoria today, saying South Africa needs the funds to reduce the deficit on its balance of payments, which is worsening because of a decline in the world price of gold.
"Recent developments in the gold markets have once again demonstrated that we cannot risk basing our policies on the assumption that the price of gold will remain favorable in the short term, although on a longer-term trend we remain confident about a rising price trend," Horwood said.
The price of gold reached a record $820 a fine ounce in 1980, but by mid-1982 it had slumped to below $300. South Africa, which produces three-fourths of the noncommunist world's gold, loses about $200 million -- averaged over a year -- for every $10 that the gold price falls.
Last month the Johannesburg Financial Mail quoted the governor of the South African Reserve Bank, Gerhard de Kock, as saying before leaving for the IMF meeting in Toronto, that South Africa did not need an IMF loan.
At the time, 35 U.S. congressmen urged Treasury Secretary Donald Regan to instruct U.S. representatives at the meeting to oppose the expected South African application because of what they called South Africa's "aggressive foreign policies and its internal policies of segregation."
De Kock and Horwood repeated the denial in Toronto Sept. 5.
It is possible that the government did not apply for the IMF loan when it was expected to because it may have been encouraged to hold off by a temporary rise in the gold price. It shot above $500 in September but has since dropped again and was $387 today.
South Africa has tried to raise the cash content of its foreign exchange reserves by negotiating three gold swaps over the past year with French, West German and Swiss banks, in effect pawning some of its gold holdings for cash.