SARB warns climate change could have dire impact on economy

JOHANNESBURG - The South African Reserve Bank (SARB) has warned that the effects of climate change could have a dire impact on the economy.

Reserve bank governor Lesetja Kganyago sounded the alarm bells at the SARB’s annual general meeting in Pretoria on Tuesday.

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He said the recent storms that hit at least four provinces have added risks to financial stability.

Kganyago said climate change, geopolitical tensions, sticky inflation and high government debt levels are all adding to market volatility.

“As part of its ongoing efforts to understand and mitigate the risks associated with climate change, the SARB conducted its first comprehensive stress test of South Africa’s major insurance companies during the 2023/24 period, which included a climate change component. Going forward, climate-related risk will increasingly feature as part of the SARB’s stress-testing scenarios.”

SARB DEFENDS DECISION TO KEEP MONETARY POLICY RESTRICTIVE

As South Africans feel the weight of elevated interest rates, the SARB has again defended its decision to keep monetary policy restrictive.

This was after the central bank kept the repo rate unchanged for an eighth consecutive time at the Monetary Policy Committee (MPC) meeting earlier in July.

While the reserve bank’s tone remains hawkish, economists predict a rate-cutting cycle is on the cards in 2024.

Kganyago said inflation risks remain: “Policy commitment to reduce inflation back to targets has been strongly signalled around the globe, and central banks have generally been cautious in their approach to policy.”