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Kganyago: Adding unemployment to Sarb’s mandate will hurt its credibility

The bank has long been under pressure to take more drastic measures to revive growth with calls for it to slash lending rates and finance government through quantitative easing.

South African Reserve Bank Governor Lesetja Kganyago. Picture: AFP

JOHANNESBURG – South African Reserve Bank (Sarb) Governor Lesetja Kganyago said formally adding unemployment or economic growth to the bank's mandate would risk policy mistakes and hurt its credibility.

The bank has long been under pressure to take more drastic measures to revive growth, with calls for it to slash lending rates and finance government through quantitative easing.

However, the governor said decreasing the repo rate, further increasing the bank's responsibilities, was not feasible.

Kganyago said this in a speech delivered virtually by the University of Pretoria on Wednesday.

The governor said the Reserve Bank has already moved to stimulate the economy, cutting rates by 300 basis points.

And in March, it launched a bond-buying programme, purchasing government debt in the secondary market to ease a liquidity collapse in the capital markets prompted by the COVID-19 pandemic.

However, despite this, some unions and politicians have called for more drastic action, including a widening of the bank's mandate.

But the governor said this could encourage policy mistakes and weaken credibility.

He said while we would all like South Africa to reach permanently high growth, this was beyond the powers of a central bank.

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