Key Points:
- South Africa wants access to new European Central Bank credit lines.
- The central bank plans two more interest rate cuts this year.
- Governor Kganyago says the rand is now more stable and stronger.
- South Africa keeps most reserves in dollars to match global trade.
South Africa wants better access to European cash. Central Bank Governor Lesetja Kganyago said on Saturday that his country is keen to use new lending lines from the European Central Bank (ECB). This comes after ECB President Christine Lagarde announced plans to make borrowing euros cheaper and easier for foreign nations to help boost the currency’s global standing.
Kganyago believes these lines would protect trade between South Africa and Europe. “It would be a welcome development,” he noted during an interview in England. Since Europe is a massive trading partner, having a safety net of euros makes business smoother during financial crunches.
The Governor also shared good news for borrowers at home. He confirmed that South Africa’s interest rate-cutting cycle is not over yet. With the current rate at 6.75%, the bank is looking at potentially two more small cuts this year and another one next year. However, he warned that this is just a guideline and depends on inflation staying low.
A strong currency has helped keep prices down. While the rand has wobbled slightly in recent weeks, Kganyago pointed out that it is much more stable than it used to be. He views the currency’s broader strength as proof that the country’s economic policies are improving.
Kganyago also touched on the hot topic of the U.S. dollar and BRICS. He dismissed the idea that developing nations are trying to destroy the dollar. Instead, they just want backup options, so they do not get cut off from global finance, similar to what happened to Russia. He noted that access to dollar systems is “a privilege, not a right.”
Regarding a shared BRICS currency, the Governor remains skeptical. He argued that a group of nations cannot have shared money without a single shared central bank. For now, South Africa keeps about 60% of its reserves in U.S. dollars simply because that is the currency most of the world uses for trade.
He finished by explaining that the push for new payment systems isn’t about politics. It is about fixing a practical problem: sending money across borders in Africa is currently too slow and too expensive.
