Reserve Bank governor Lesetja Kganyago has warned that nationalising the Reserve Bank could have dire consequences for the rand and the country’s economy.
Speaking to the Sunday Times, Kganyago said that central cause of Turkey’s financial crisis – which has fed fears it would spread to other emerging-market economies such as South Africa this week – was its loss of credibility.
“(Those) who think that they would like to meddle in a central bank, they only need to look at Turkey and see what the consequences of meddling with a central bank are,” he said.
He added that raising rates is the only tool central banks have to protect the value of a currency.
“You can look at Argentina too, where the meddling with a central bank led to a collapse in their currency,” Kganyago said, citing the fact that the Argentine peso is 37% weaker against the dollar and the country has sought an IMF rescue package.
Turkey’s crisis had a direct impact on South Africa and the rand this week, with the currency flirting with the R15.00/dollar several times.
The rand came under renewed pressure in mid-day trade on Friday, caught in a trap of broad emerging market frailty, while the local economic outlook remains gloomy with some analysts suggesting that the country may be entering a recession.
Bloomberg reported that the crisis in Turkey has the emerging world bracing for a bear market and central bankers staring down fresh complications.
It noted that the Turkish lira weakened further on Friday after US Treasury Secretary Steven Mnuchin said the country would face more sanctions if it didn’t release a detained American clergyman.
In South Africa, the median prediction by 22 respondents in a Bloomberg survey found that the average gross domestic product will be 1.4% this year, some way below president Cyril Ramaphosa’s hopes of lifting economic growth to 3% in 2018.