South Africa is considering some kind of “funding for lending” scheme for banks as one option in response to the coronavirus crisis, central bank deputy governor and head of the Prudential Authority Kuben Naidoo told Reuters on Tuesday.
“We’re not the primary drivers, but I know the Treasury is considering these issues,” Naidoo said by phone, adding this would be a Treasury initiative.
“The central bank would be involved, our law doesn’t allow us to lend unsecured, but as part of a broader design of a scheme we’re prepared to be involved.”
South Africa’s Treasury did not immediately respond to a request for comment.
On Monday the bank cut its growth forecast to 4% putting the country’s economy further into trouble. The economy was already in recession prior to the spread of COVID-19. The economy is battling varous challenges including policy uncertainy and electricity supply constraints.
In its Monetary Policy Review, the Reserve Bank says growth this year will probably range between -2% and -4% with downside risks should the lockdown be exteded.
The Central Bank says growth is unlikely to exceed 1% next year. The bank says the average growth in the decade was at its weakest, due to electricity shortages and slow pace of structural reforms. This while the rising risk premium was keeping the bank from deeper lending cuts.
CEO of Weaver Investments, Owen Khumalo explains:
-Additional reporting by SABC