Written by Kopano Gambi
CAPE TOWN (Reuters) – South Africa annually assesses the Gold and Foreign Exchange Emergency Reserve Account (GFECRA) held at the central bank and withdraws funds from it when they become available, Enoch Godongwana Treasury said. the minister told Reuters on Thursday.
In his annual budget speech on Wednesday, Godongwana said the government would change the framework governing the GFECRA account, allowing it to draw down 150 billion rand ($8 billion) over the next three years to limit borrowing. .
South Africa is suffering from a sluggish economy and high debt, with a general election on May 29th that could see the ruling African National Congress lose its parliamentary majority for the first time since the end of apartheid 30 years ago. be.
Godongwana told Reuters that it would be more effective to use the money to reduce the country's debt rather than use it for spending.
“We face a huge challenge of debt, which crowds out all other spending,” Godongwana said.
The GFECRA account tracks the gains and losses on the country's foreign exchange reserve transactions, and the balance is more than R500 billion, which is greater than the plausible loss of foreign exchange reserves due to the appreciation of the rand, Treasury said.
Treasury said the reversal of GFECRA would reduce debt servicing costs by approximately R30 billion over the next three years, reducing debt to GDP, which is expected to peak at 75.3% of GDP in 2025/26. said it was helpful. That's up from an estimated 77.7% in November.
Some analysts had suggested that the money be used to pay down debts of struggling state-owned enterprises such as ports and logistics company Transnet.
But Mr Godongwana said funding Transnet would “just put money in a hole”. Instead, the company should implement a turnaround strategy and leverage its balance sheet to solve the challenges it faces, he said.
Part of that strategy includes privatizing some of Transnet's operations that it can no longer sustain, a contentious issue for Labor, particularly in an election year.
Analysts said the government's frequent access to GFECRA funds also raised concerns that the money could be used to address fiscal mismanagement.
Godongwana said the framework developed would prevent this, but added that if not heavily guarded, there was a risk that a future administration would lift these safeguards.
($1 = 18.8901 rand)
(Reporting by Kopano Gumbi; Writing by Nellie Peyton; Editing by Alexander Winning, Olivia Kumwenda-Mtambo, Hugh Lawson)
