Reserve Bank Governor, Lesetja Kganyago says the economy will continue to take a beating if debate around the bank’s shareholding continues.
It’s just days after the Constitutional Court dismissed Public Protector Busisiwe Mkhwebane’s appeal against a high court judgment which ordered that she personally pay 15% of the costs from her own pocket in a matter involving the Reserve Bank.
The Central Bank’s mandate and independence have been a point of discussion in political debates.
The South African Reserve Bank Governor has issued a warning on the potential consequences on debates about the banks mandate.
He said it sends a message to local and international investors that the macroeconomic frame work is at risk. This would in turn make the cost of borrowing higher and undermine investor confidence.
He also explained that ordinary South African’s will pay the ultimate price for sky rocketing interest rates on public debt. Kganyago said the central bank encourages public debate however it should be based on evidence.
Kganyago also advised against allowing inflation to run unabated. Even though this may have led to more growth, he said it would have been unsustainable as this would result in stagflation with weak growth and high unemployment.
Kganyago explained that the central bank targets inflation over jobs because it cannot rely on the jobs data as a guide for monetary policy. Kganyago also said the obsession with monetary policy will lead to a failure to discuss difficult and vital reforms that could rescue the country’s economic growth. Adding that, monetary policy will not produce the skills needed to raise the country’s potential growth rate.
