SA's financial system 'safe': IMF
Thu, 23 Oct 2008
South Africa's financial system is "fundamentally sound and well capitalised," according to an annual country report released by the International Monetary Fund (IMF) on Wednesday.
The report stated that the South African economy had shown resilience during the global financial instability.
The report projected growth of 3.8 percent for 2008 and 3.7 percent for next year.
It stated that power supply, lower demand in partner countries, elevated debt service burdens in households would, however, be major risks to the economy.
The report highlighted that South Africa had not been immune to the inflationary pressures from increases in global food and oil prices.
It further stated that inflation had continued to rise but was expected to peak later in 2008, before beginning a downward trajectory.
The IMF projected the current account deficit at nine percent of the GDP in 2008, and 9.6 percent in 2009. This in comparison with the Treasury's 2008 budget forecast of seven to eight percent of GDP.
The report stated that the rising current account deficit and inflation posed a challenge if the country hoped to accelerate growth and spur job creation.
The IMF said it supported the country's "flexible" exchange rate system as it provided a buffer against external risks.
The international body said it supported the treasury's view that it was counter-productive to influence the level of the real exchange rate through intervention.
Meanwhile, the IMF's Financial System Stability Assessment Report (FSAP), also released on Wednesday, stated that any further liberalisation in the country's exchange control system would be challenging in the light of the volatile financial markets, heavy reliance on portfolio inflows and corporate deposits in the banking system.
The FSAP mission met with the South African Reserve Bank, the Financial Services Board, Johannesburg Stock Exchange, National Credit Regulator, banks and insurance companies.
Sapa
