South Africa: SA Central Bank's Gross Reserves Reach Record High

analysis

The SA Reserve Bank's gold and forex reserves rose almost $5-bn, or around 10%, in September 2019 to a record $54.9-bn. This is a double-edged sword as the increase came from fresh debt proceeds, which make the economy vulnerable on other fronts.

The South African Reserve Bank (SARB) publishes data on its holdings of foreign exchange, gold and IMF Special Drawing Rights on a monthly basis. A lot of the focus is on net foreign reserves, which SARB data on Monday 7 October 2019 showed fell in September to $44.058-billion from $44.226-billion. This is hardly front-page news.

But gross reserves surged by almost $5-billion to $54.9-billion, a record high, which at first glance is a rare piece of good economic news. (The difference between the two is technical, reflecting the bank's forward position and change in foreign currency deposits received). This largely stemmed from the proceeds of the $5-billion worth of eurobonds which the Treasury recently issued on international markets.

This helps to provide an extra cushion against external shocks -- something the economy can really use in these volatile times. Among other things, it raises South Africa's import cover to 6.6 months. (Import cover measures the number of months...

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