RESERVE Bank governor Gill Marcus has conceded that while a possible reduction in the US Federal Reserve’s stimulus of US financial markets was causing volatility in emerging-market assets‚ it is "unsustainable” to buy $85bn in bonds every month for too long.
Ms Marcus was speaking at a function organised by professional services firm PwC in Johannesburg on Wednesday morning.
Emerging-market currencies‚ including the rand‚ have been under significant pressure this week amid increasing concern that the Fed could from September start reducing the $85bn it has been spending every month on buying bonds to add liquidity to its financial markets.
Most of that money has found its way to emerging markets‚ where interest rates are still higher than those in developed countries and therefore offer investors a higher rate of return.
Although the Fed made the announcement on the tapering of quantitative easing in June‚ the effects still continue.
"Look at the impact on the rest of the world ... it is absolutely volatile at the moment‚” Ms Marcus said. "We are all being hit by this.”
Speaking on the global economy‚ she said South Africa and many other countries continued to feel the effects of the 2008 financial crisis and the subsequent recession‚ necessitating strong leadership and new ways of thinking.
South Africa needed to take "very tough decisions” to be a "standout” investment destination of choice in this environment.
Many countries have‚ since the recession‚ battled to grow their economies and create jobs for the millions who lost their jobs and for new entrants into the labour market. South Africa is among these countries‚ with an unemployment rate of more than 25%‚ or 4.7-million of the labour force.
Ms Marcus referred to the current period as "unprecedented times”‚ with a financial crisis that ran "very deep”. © BDlive 2013