Global Courant 2023-05-10 16:15:23
The South African Reserve Bank (SARB) has implemented a new toolkit to assist in the implementation of monetary policy in the country.
Speaking at the CFA Society South Africa & Investec Breakfast Conversation on May 10, Rashad Cassim, the deputy governor of the SARB, said South Africa is one of the first emerging markets to adopt a new method of monetary policy implementation, such as can be seen in countries such as New Zealand and Norway.
Monetary policy broadly refers to the process by which central banks such as SARB manage the supply and demand of money to achieve economic objectives such as price stability and economic growth.
According to the Cassim, banks are getting a larger supply of reserves (known as settlement balances) than they need to meet reserve requirements and make interbank payments.
Essentially, there is now a surplus of bank reserves that can be relied upon when crises arise, such as the pandemic, for example. Previously, the old system suffered from a shortage of bank reserves.
Cassim said the SARB had made money to help the banking system through loan creation. He explained the method by which the bank created a sum of money and gave the following example: