Treasury in talks to use R459 billion Reserve Bank forex account

The National Treasury is having discussions with the Reserve Bank about using part of its R459 billion gold and foreign exchange reserve account to alleviate some of the government’s financial problems and reduce its debt burden. 

Head of the Treasury’s budget office, Edgar Sishi, told Parliament last week that the Treasury is discussing the possibility of using the gold and foreign exchange reserve account with the Reserve Bank. 

Sishi presented before Parliament’s two finance committees in response to various submissions made during public hearings on the Medium-Term Budget Policy Statement (MTBPS). 

He did not give details about the purpose of the discussions or their nature to Parliament. However, he said the process would be done according to existing legislation. 

“It will not be correct for me to create the impression now that there is something new for us to say, but there are engagements in this regard going forward, which hopefully should be able to produce some results at the appropriate time,” Sishi said.

The Reserve Bank oversees the gold and foreign exchange reserve account, which contains unrealised profits or losses on the reserves that are incurred due to exchange rate fluctuations.

While the gains – and losses – accrue to the government, the Treasury has refrained from tapping them so far.  

Pressure has been placed on the Treasury to tap these reserves to address the country’s severe fiscal challenges, particularly its growing debt burden and interest payments. 

In an interview with Bloomberg following the MTBPS, Finance Minister Enoch Godongwana said that there are several hurdles that have to be overcome for the Treasury to tap into the account. 

“Here is the problem, that thing is not hard cash”, and the value fluctuates on a daily basis, Godongwana said. This makes it difficult to realise the value of the reserve on short notice. 

“We are looking into it”, but no timeline has been set for determining whether the account will be accessed.

There are also technicalities associated with accessing the account “because for the Reserve Bank to take the money out of the system, they are going to do it at a cost to themselves.”

Deputy Reserve Bank governor responsible for financial markets Rashad Cassim pointed out to Business Times that its balances “are not a windfall that can be enjoyed with no further costs”. 

The amounts are unrealised gains — paper entries in a ledger whose value can be realised only by selling the underlying asset.

Godongwana made clear in the interview with Bloomberg that the possibility of tapping the reserves has not been ruled out. 


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