THEBE MABANGA
SOUTH Africa’s gross reserves fell by 2.4% to $54 420 million in September compared to the August, data from the Reserve Bank showed on Wednesday.
The fall was mainly due to a drop in foreign exchange reserves, and a fall in gold reserves caused by a 4.2 % fall in the gold price over the month
In rand value, gross reserves fell by 1.6% to R916.4 billion, also due to lower foreign exchange reserves, which outweigh the impact of a weaker rand.
The rand depreciated marginally by 0.8% against the US dollar during the month, according to the bank.
The bank also reported that import cover provided by reserves increased to around 12 months, meaning South Africa can import wat it requires at current prices for a bout a year without generating income.
Import cover was enhanced because the value of imports was limited by lockdown measures, locally and abroad, as well as supressed domestic demand.
The international liquidity position, a measure of a country’s solvency, increased slightly by $150 million to $50 665 million due to reduced foreign currency deposits received, while the forward position was almost steady.
“The level of reserves will remain volatile in the short term, with most of the changes likely to reflect valuation adjustments. Investor sentiment will remain volatile and vulnerable given the poor global growth outlook,” Nedbank said in a research note.
Nedbank also noted that “concerns about the South African fiscal situation and weak growth prospects will continue to weigh negatively on investor confidence, reduce the attractiveness of the country’s assets and potentially undermine foreign capital inflows.”
Gold reserves are expected to be supported by the higher gold price and the precious metal’s safe-haven status.
(COMPILED BY INSIDE POLITICS STAFF)
