DUMA GQUBULE: Reserve Bank governor has made up his rule on QE
Countries that borrow in their own currencies face fewer risks and in SA 90% of sovereign debt is denominated in rand
Over the past few months Reserve Bank governor Lesetja Kganyago has repeatedly stated that SA cannot implement quantitative easing (QE), the purchase of government and corporate bonds, because it does not have inflation and interest rates at or close to zero. But recent events have shown that the governor has made up that rule.
Last week the Financial Times (FT) editorial board wrote: “QE has now truly gone global. There need not be a taboo against emerging markets using QE.” The newspaper said QE is riskier for countries that depend on borrowing in foreign currencies, whereas countries that borrow in their own currencies face fewer risks. In SA, 90% of sovereign debt is denominated in rand.