( 2 minutes read)
· The South African Reserve Bank bought R11.4 billion worth of
government bonds during April, as part of its measures to infuse
liquidity in the market, as against R1 billion bond purchases in
March
· Last week, the finance ministry mooted the idea of the
Reserve Bank purchasing government bonds directly from Treasury, as
part of efforts to fund interventions for Covid-19 and to support
structural reforms to lift economic growth.
· Last week Reserve Bank Governor Lesetja Kganyago said that
the bank’s decision to purchase government’s bonds is purely to
address dysfunction in the market.
The South African Reserve Bank bought R11.4 billion worth of
government bonds during April, as part of its measures to infuse
liquidity in the market, as against R1 billion bond purchases in
March. This is a part of the steps that are being taken by the central
bank to rejuvenate the economy. The bank has also lowered interest
rates by 2% to support liquidity in the economy and to motivate
industrial units and households to avail credit from the market. The
bank now has over R20.65 billion worth of government bonds.
Last week, the finance ministry mooted the idea of the Reserve Bank
purchasing government bonds directly from Treasury, as part of efforts
to fund interventions for Covid-19 and to support structural reforms
to lift economic growth. Last week Reserve Bank Governor Lesetja
Kganyago said that the bank’s decision to purchase government’s bonds
is purely to address dysfunction in the market.
South Africa with a series of downgrades from rating agencies is
reeling under difficulty. Also, the South African Chamber of Commerce
(SCCI) said that the business confidence index for the April month is
at an all time low since 1985. There are reports that the major
reasons for the consistently low rating is on account of poor
performance of the two government sector companies, such as Eskom, the
power utility and the South African Airlines (SAA). While the latter
is reportedly to be wound up or liquidated, the former is now facing
the problem of lack of demand for power since most of the industrial
units are under lockdown.
