The central Bank and National Treasury are in active talks to help stem the tide of South Africa’s growing budget deficit.
Governor Lesetja Kganyago told the media that he is “engaged with Treasury”, especially after the South African Reserve Bank met yesterday to keep interest rates steady.
“We have also bought in international expertise to engage on these matters,” including on how to deal with the capital position of the bank, Kganyago said.
Kganyago added that the two institutions are discussing how much the withdrawal will be. The value of the reserves is valued at R497 billion.
According to Bloomberg, the issue is complex, as the profit on the reserves changes from month to month and finding out the exact amount would mean selling some of of the reserves. This could unnerve some investors.
SARB KEEPS REPO RATE UNCHANGED
Yesterday consumers breathed a sigh of relief as the SARB chose to keep the repo rate unchanged for the country.
This means the repo rate is 8.25%, while the prime lending rate stays at 11.75% in South Africa.
This decision follows the trend from the MPC’s previous meeting held in September where the rate was also left unchanged. The governor said that the decision to keep the rate unchanged was unanimous.
One of the bank’s main weapons to battle the inflation monster in the country is to hike interest rates. Kganyago said that risks to the inflation outlook are still assessed to the upside.
“As we approach the end of the year, easing headline inflation and modest economic growth remain the dominant global economic trends of this past year. While households and firms exhibit some resilience, economic growth has been volatile and highly sensitive to new shocks. While our baseline inflation forecast has improved, risks to the inflation outlook are still assessed to the upside,” the governor explained.