S/Africa’s Financial Stability Threatened By High Govt Debts – SARB

The South African Reserve Bank (SARB) has warned the government against incurring high public debts to save its financial system.

The central bank said high debts are a precursor to a potential collapse of the financial system.

South Africa’s debts amount to 84% of its Gross Domestic Product (GDP) as the economy battles the dire effects of the global COVID-19 pandemic.

In its bi-annual review of the nation’s financial soundness, the apex bank in the country said a close affiliation between the financial sector and the government has become risky.

The document said “the interconnectedness between the financial sector and the sovereign has emerged as a major threat to financial stability in South Africa,”

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South Africa in March announced its second recession in two years as President Cyril Ramaphosa faces more pressure to put the country’s flailing economy on a solid pedestal.

The President’s policies have been put under the spotlight in recent months as the nation struggles to come out of a hard-biting recession and a pandemic.

The SARB said in September that a GDP contraction of -8.2% is expected in the third quarter of 2020, as against earlier projections of -7.3%.

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