Govt may harm Reserve Bank by tapping reserves, S&P says
South Africa’s decision to tap profits on the country’s gold and foreign-exchange reserves to curb debt levels could impact the independence of the central bank, warned analysts at S&P Global Ratings.
"Granting government access to unrealised profits could politicise the SARB, and prioritise fiscal needs over broader monetary and economic stability," S&P’s Zahabia Gupta and Frank Gill wrote in a note on Wednesday."This plan is a convenient, but limited and temporary solution to the country’s long-standing fiscal challenges."
S&P said implementing a rules–based, transparent framework for the transfer of the unrealised profits to the government would help protect from those risks — something the National Treasury says it plans to do, though details are still being worked out.
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