Dipping into gold & foreign exchange reserves to pay off some debt not 'free money' - Treasury

CAPE TOWN - Treasury says dipping into the reserve bank’s gold and foreign exchange contingency reserve account to pay off some of its debt does not make it "free money". 

Some opposition parties have expressed concern about Finance Minister Enoch Godongwana’s announcement on Wednesday that around half of the R500 billion in the account will be withdrawn in part to defray debt costs. 

Tabling the national budget on Wednesday, Godongwana also tabled a bill that will allow for equity of around R100 billion from this drawdown to be returned to the central bank. 

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Treasury said that by withdrawing from the GFECRA account, it’s also paving the way for a new methodology of running the account.

Held by the reserve bank, it’s meant to protect it from currency fluctuation. 

Treasury Director-General Duncan Pieterse said it’s not the intention to make regular withdrawals. 

"These are valuation gains because of a steady depreciation of the currency over time, so you have to leave enough of a buffer to protect ourselves against any reversals, any strengthening of the currency." 

Pieterse said the reserve bank also had to be compensated for costs associated with the withdrawal. 

"It’s not free money, as it were, because there is a cost associated to it." 

The withdrawal will allow Treasury to reduce the country’s debt burden, which stands at over R5 trillion, by around R30 billion over the next three years.