South Africa: Easing Does It - Emerging Market Central Banks Drink the Qe Kool-Aid


The SA Reserve Bank (SARB) was not the only emerging market central bank to launch a version of quantitative easing in response to the 'Great Lockdown'. According to the IMF, 18 emerging market central banks took the plunge. And the measures generally worked, stabilising financial markets and bringing bond yields down.

The International Monetary Fund (IMF), in its latest Global Financial Stability Report, noted that the "new game in town" was asset purchases by emerging market central banks.

"During the Covid-19 crisis, for the first time on a broad basis, at least 18 emerging market central banks adopted unconventional policies through the use of asset purchase programmes targeting government or private sector bonds in local currency," the IMF said.

In the case of economies such as South Africa's, where interest rates are well above zero, the IMF said the aim of such purchases was to provide liquidity to the financial sector. In economies with relatively low rates, such as Poland's, the aim was also for monetary stimulus, mirroring a "somewhat similar" reason to that of advanced economies.

Some central banks also "explicitly stated that one of their objectives was to temporarily ease government financing pressure in the face of the...

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