Analysts at S&P Global Ratings have warned that South Africa's decision to leverage the benefits of the country's gold and foreign exchange reserves to rein in debt levels could impact the central bank's independence. .
Finance Minister Enoch Godongwana told MPs last week that an emergency account at the South African Reserve Bank would be restructured to free up R150 billion and ease borrowing costs for the cash-strapped country.
“Giving governments access to unrealized gains could politicize the SARB, prioritizing fiscal needs over broader financial and economic stability,” S&P's Zahabir Gupta and Frank Gill wrote in a note Wednesday. There is a possibility that it will happen.” “This plan is a convenient but limited and temporary solution to this country's long-standing fiscal challenges.”
The account, known as the Gold and Foreign Exchange Emergency Reserve Account, showed a paper profit of R507.3 billion as of last month. This is a significant increase from R1.8 billion in 2006, reflecting the decline in the value of the South African currency against the dollar. .
S&P said introducing a transparent, rules-based framework for transferring unrealized gains to governments would help protect against these risks. The National Treasury says it is planning this, but the details are still being worked out.
South Africa's central bank regularly fights to protect its independence amid calls, including from some in the ruling African National Congress, to expand its responsibilities to include not just price stability but jobs and economic growth. It has been unfolding.