South Africa tapping into reserves as needed, says Finance Minister.

February 22, 2024
1 min read


  • South Africa will draw on the Gold and Foreign Exchange Contingency Reserve Account (GFECRA) to limit borrowing.
  • The drawdown will save money on debt-servicing costs and help reduce the debt-to-GDP ratio.

South Africa’s Finance Minister, Enoch Godongwana, announced that the country will evaluate and withdraw funds from the GFECRA held at the central bank to limit borrowing. This decision comes as the country faces economic challenges and high debt ahead of an upcoming general election. The drawdown of 150 billion rand over the next three years is expected to save about 30 billion rand in debt-servicing costs and help reduce the debt-to-GDP ratio. However, some analysts have raised concerns about the government’s frequent access to these funds, fearing it could lead to fiscal mismanagement.

The government is considering using the funds to reduce the debt liability rather than allocating them to spending. Godongwana emphasized the importance of addressing the country’s debt challenges, which are crowding out other areas of spending. While there were suggestions to use the funds to pay down debts of struggling state-owned companies like Transnet, Godongwana believed that simply giving money to these companies would not resolve the underlying issues. Instead, he proposed that these companies implement turnaround strategies and use their balance sheets to address challenges.

The decision to draw from the GFECRA account has sparked discussions about potential risks and safeguards to prevent fiscal mismanagement. Godongwana assured that the framework developed would protect against misuse of the funds, but cautioned that future administrations could potentially undo these safeguards if not closely monitored. The move is seen as a strategic effort to manage the country’s debt crisis and improve economic stability in the long term.

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