ANC welcomes repo rate cut by the South African Reserve Bank
14 April 2020
The ANC welcomes the South African Reserve Banks (SARB) responsiveness to the emerging economic situation. The COVID-19 era has called upon governments and central banks to activate fiscal and monetary policy instruments as central tools to mitigate the effects of a contraction in economic activity. Coronavirus and the lockdown measures intended to disrupt its spread, will have a negative impact on South Africa's already struggling economy and public finances. This pandemic is the greatest public health and economic emergency ever to face humanity in peacetime history.
The current crisis required drastic responses from the public policy instruments and the actions of the SARB mirror our view that macroeconomic policy must act in the interest of the overarching goal of economic growth and development.
In this context, we welcome the decision by SARB to cut the repo rate by 100 basis points, or one percentage point. This brings South Africa's repo rate to 4.25% effective from April 15. Our monetary policy is being geared towards lowering the cost of capital while supporting many vulnerable households and firms. This monetary policy stance will contribute towards easing financial conditions and access to credit across the nation.
Although greatly welcome, there is a likelihood that the decision alone will have a moderate impact on softening the impending blow to households and businesses, particularly small businesses. This is a crisis like no other. The probability of a global recession is now almost certain as the global economy is at a standstill. Ironically, this health pandemic finds the South African economy in an unhealthy recessionary state characterized by: