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the ZAR5BN AfDB (or IMF, world bank, NBD etc.) loan to south africa will never leave the NYFed, a thead:
all USD-denominated international transactions go through and are cleared at the NYFed. international finance institutions, such as the AfDB, keep accounts with the NYFed, as do most national governments.
to "extend" the loan, the AfDB will transfer, from its NYFed accounts, the USD-equivalent, into the south african government's (specifically, the SARB's) account, also at the NYFed. the money never actually "leaves" the NYFed, it is just transferred from one account to the other.
domestically, the SARB will mark-up its assets on its balance sheet by ZAR5BN (to reflect the "cash" held in its NYFed account) while also crediting ("printing" new money) treasury's account at the SARB by ZAR5BN. this will reflect as a liability on the SARB's balance sheet.
national treasury can now spend the "loan", from its SARB account, with "brand new" money that was created by the SARB. the actual "loan money" is either idle in a reserve account on servers at the NYFed building or (more likely) the SARB used it to buy U.S. government bonds.
if the act of national treasury spending the "new" money leads to excess money in the domestic banking system, this may push the overnight repo rate below the SARB's target rate (currently 3.5 per cent).
if this happens, the SARB will have drain excess central-bank money by (usually) selling government bonds and "destroying" the money it received. this is standard CB interest-rate management operations and happens regardless of where treasury's money "came from."
in closing, there is absolutely no logical reason for treasury to "fund" local expenditures with international, foreign-currency denominated loans. all local treasury expenditure comes from the SARB, anyway.
but ke...
but ke...
