SARBs failure to reduce the interest rate in a time of crisis must not go unchallenged
Statement by the Alternative Information and Development Centre (AIDC)
22 January, 2021
It is a disgrace that the South African Reserve Bank (SARB) failed to reduce the interest rate even whilst inflation is at very low levels. It would have alleviated some of the pressures on many South African households who are increasingly dependent on credit to make-up for lost incomes or falling real wages. It would also have given relief to small businesses.
The failure to reduce the interest rate exemplifies how the SARB, like Treasury, is unwavering in their commitment to failed neoliberal policies regardless of the detrimental impacts it has for the majority in the country. The only real obstacle in the way of reducing the interest rate would be the power of the financial sector. Reducing interest rates pose no real threat to the Rand. Firstly, SA’s currency reserves are the highest they have been since the 1950 and secondly should a radical reduction of interest rates lead to currency outflows these can be easily mitigated by strengthening exchange and capital controls. Such measures are of course completely ruled-out by the governor of the SARB and the Minister of Finance, despite even the International Monetary Fund (IMF) reversing their historical position and coming out in support of such measures.
The failure to cut the interest rate, and the overall conservative stance that ignores all evident alternatives is shocking. The SARB is able to provide over R300 billion in direct lending to government at no interest, using this provision in the SARB Act in a time of extreme crisis. The leaders of the Treasury and the SARB instead embrace expensive debt service options to promote ultra-austerity, refusing to fill tens of thousands of vacant posts for nurses and doctors. Think of the thousands of vaccinators needed to roll-out the over 300 000 daily vaccinations needed to reach 67% of our population by the end of the year
In the present war-like situation, the monetary and fiscal institutions of our country are promoting a policy of death. The SARB and Treasury remain committed to policies that exacerbate suffering and hardship faced by the majority of South Africans. It must not pass unchallenged.
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