The Gold and Foreign Exchange Contingency Reserve Account is not a pot of gold, and treating it as such would be reckless, according to South African Reserve Bank governor Lesetja Kganyago.
He was responding to calls that the national treasury make use of the reserve, which is managed by the Reserve Bank, to plug the gaping holes in the country’s public purse.
South Africa’s fiscal predicament has been used to justify another round of painful spending cuts, announced by Finance Minister Enoch Godongwana in his medium-term budget policy statement earlier this month.
According to Kganyago, the treasury is in talks with the Reserve Bank over the possible use of the reserve, which holds R497 billion. The talks will consider advice from international experts, the governor said.
The Gold and Foreign Exchange Contingency Reserve Account essentially records the net profits, and losses, made based on movements in foreign exchange rates and gold prices.
“The issue is not that simple. And the notion that thinks there is some pot of gold hidden in the Reserve Bank — and that all that is needed is to figure out how to get into that pot of gold and bingo our problems are solved — is very, very simplistic. At worst, it is actually very reckless in terms of policy.”
A number of parties have called for the treasury to tap the account, including the Institute for Economic Justice.
In a policy brief released ahead of the medium-term budget statement, the institute said the treasury could easily access these funds — and that the fact that this money hasn’t already been paid to the treasury is an international anomaly.
