National Treasury has decided to withdraw R150-billion from the Gold and Foreign Contingency Reserve Account which is held at the Reserve Bank to avoid fiscal risks.
It says the funds will be used to reduce borrowing and debt-servicing costs which have been a function of constrained government finances. Government has indicated that these funds will be withdrawn in tranches over the next three years starting with a R100-billion this year.
Reserve Bank Governor Lesetja Kganyago explains.
“Once we have transferred R250 billion to the Treasury, the Treasury is going to be spending the R150 billion, when they spend that money, it’s in the system, money has been created. So, what we then had to do was to say to the Treasury, we’re giving you this money and we are going to experience sterilization costs and because we are going to be experience sterilization costs, we need to be compensated for that. The agreement with the Treasury is that R100 billion will go back to the Reserve Bank so that we can pay for those sterilization costs over a period of time.”
