The last thing this economy needs is reckless action in response to Covid-19. South Africa should not follow its counterparts in the West by pursuing reckless monetary and fiscal policies, writes Mpiyakhe Dhlamini
Global financial markets continue to be hit hard by the Covid-19 coronavirus outbreak.
Central banks in developed countries lowered rates and pumped billions into their economies; the temptation might be very strong for the same to happen here.South Africa cannot do this. Society would become less able to respond to shocks and invest wisely in the future because of the decrease in savings.The traditional conception of a central bank is of an institution that dispassionately reads the economic tea leaves and formulates the best answer regardless of the political situation.
Eventually, the debt accumulates to the point where no sane investor is willing to accept the artificially low bond yield and the government and its central bank can once again choose between inflation or an honest default. Clarity of thought is crucial in a crisis. South Africa requires leaders that understand that the economy’s long-term health supersedes all other concerns.
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