JOHANNESBURG (Reuters) – South Africa’s central bank has issued a 3.45 billion rand ($200 million) guarantee to bail out the Corporation for Public Deposits (CPD), a government investment arm hit by surging defaults at state agricultural lender Land Bank.

The issue adds a further strain on state finances as the government props up its main power utility and airline, which were already struggling before the coronavirus crisis, and now faces rising defaults at the agricultural lender.

CPD, which purchased various debt instruments from Land Bank, said overall it suffered a 2.8 billion rand loss in the 2019/20 financial year, necessitating the central bank bailout.

Deputy governor of the Reserve Bank (SARB) and chairwoman of the CPD, Fundi Tshazibana, told Reuters in an interview this week the guarantee was to cover the investment arm’s losses in the 2019/20 period and replenish reserves, which had dwindled to zero.

“We had to provision for what we will not be able to recover from the Land Bank. That was one of the reasons why we (central bank) had to provide the guarantee,” said Tshazibana.

“Because of the Land Bank default, we were running at a loss and we weren’t going to be a going concern…That would have been of real concern to depositors,” she added.

In April the Land Bank, the country’s largest agricultural-focussed lender, defaulted on 50 billion rand of loans repayments and in June it failed to make interest payments of nearly 120 million rand.

On Friday the Land Bank told Reuters it had not made interest payments of around 320 million rand on debt which was due end June.

The South African Treasury guarantees around 5.7 billion of the Land Bank’s debt and last week granted the firm 3 billion rand of emergency equity funding.