Kganyago emphasises capital flows’ potential danger and utility

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The Reserve Bank Governor Lesetja Kganyago says capital flows are a force that is dangerous, as well as useful and powerful. He was addressing the International Monetary Fund’s (IMF) lecture on the role of capital flows in achieving sustainable growth in emerging market economies.  

Kganyago believes that capital flows can benefit countries with low savings rates and greater investment opportunities, and he urges countries to welcome capital flows, manage risks, and cultivate institutions that can provide productive investment choices.

Kganyago says global capital flows have the power to support investment, reduce financing costs and accelerate convergence in developing economies, and says this is especially where domestic savings are below investment needs. 

He says for countries where investment opportunities exceed local savings rates, doing without capital flows means giving up on significant growth and advises that it is better for these countries to welcome capital flows and be vigilant about the risks. 

 “The South African case shows both sides of the coin,  intelligent use of capital flows in one period, and abuse in the second. For countries where investment opportunities exceed local savings rates, doing without capital flows means giving up on significant growth. It is not an attractive strategy,” Kganyago says.

He adds, “A better one is to welcome capital flows, control risks and nurture institutions that can deliver productive investment choices. That applies to climate finance, too. We need to remain optimistic about capital flows and vigilant about the risks, rather than pessimistic about the flows and allergic to the risks, or naïve about the flows and blind to the risks.” 


IFM Managing Director Kristalina Georgieva says the world is still faced with tremendous challenges. She says the Russia war in Ukraine has dampened global recovery from the Covid crisis.  

The impact of the crisis has translated in to slower growth and high inflation.  

Georgieva says, “We project growth at around 3% over the next five years, this is the weakest medium term forecast, we have had in decades, historical growth of 3.8%, very heavy burden for those people in countries that are faced with the hardest tasks for them families, for their communities, it makes it harder to boost living standards, to reduce poverty and to invest in the future, and we need consolidated efforts to address cost of living crisis, it weighs most heavily again on the most vulnerable.

She says while inflation has begun a downward trajectory from multi decades high, it’s not down enough for central banks to ease interest rates.  

Central banks across the world have raised rates in an effort to curb the high inflation, and the IMF says this has helped tame rising inflation.