In an extraordinary move to cushion the impact of the coronavirus (COVID-19) pandemic, the South African Reserve Bank (Sarb) on Wednesday announced several measures to ensure the flow of money in the economy as we deal with the crisis.
The interventions include quantitative easing that would see the central bank buy longer-term government securities to increase the money supply and encourage lending and investment.
That aligned with the approach of other central banks around the globe as the economic impact of the virus took its toll on the world economy.
The Sarb said it would buy an unspecified quantity of government securities or bonds in the secondary market comprised of development capital, venture capital, and the alternative exchange.
In line with the new measures, the Sarb would also be printing more money.
The quantitative easing process is a monetary policy tool used by other central banks to make sure there is enough money in the system and to drive economic activity during times of crisis.
The Sarb was under pressure to implement protective measures against the COVID-19 pandemic, which caused havoc on local and global markets.
The move may even be welcomed by some in the African National Congress who were proponents of a new mandate of the bank which focused on quantitative easing, among other alternatives.
However, the bank was swift in stating that the current moves should not be construed as a signal regarding the future of its monetary policy stance.
“Any changes to the liquidity management strategy by the SARB should not be construed as providing any signals regarding the future monetary policy stance,” Sarb said in a statement.
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