Skip to content

South Africa will Use a Third of its Gold and Forex Reserves to Manage Runaway Debt 

Finance minister Enoch Godongwana announced this unusual move during his budget speech in parliament, this week. South Africa will withdraw $8 billion over three years. Godongwana said steps will be taken to ensure that sufficient buffers are available to absorb exchange rate swings and the solvency of the Reserve Bank is not compromised. The financial markets seemed to welcome the move, with the currency appreciating while bond yields went down. Some see this is a smart move, as holding on to savings may not be wise when debt service costs are making you miserable despite your cash position. At the same time, dipping into the reserves is akin to selling the family silver.