Reserve Bank firm on its mandate
Institution opposes remedial action bid
THE Reserve Bank is set to challenge the public protector’s recommendation on changing its mandate.
The bank said yesterday that the ordered remedial action directing parliament to change the constitution to amend the Reserve Bank’s powers, had had an immediate and negative impact on the markets and the exchange rate of the rand.
Public protector Busisiwe Mkhwebane ordered the change as part of the remedial actions in the CIEX report investigation, released at a briefing in Pretoria on Monday.
It would effectively put an end to inflation targeting, a core tenet of the bank’s monetary policy.
Mkhwebane’s proposed change is that the bank’s primary objective should be to promote balanced and sustainable economic growth in the republic while ensuring the socioeconomic well-being of the citizens is protected.
“The amendment would, if effected, strip the Reserve Bank of its key competency to protect the value of the currency and the well understood role that central banks play in securing price stability.
“The remedial action proposed will have a negative impact on the independence of the Reserve Bank,” the bank said yesterday.
It said it had consulted its legal team and had been advised that the remedial action prescribed by the public protector falls outside her powers and is unlawful.
The bank said it had been advised to bring urgent review proceedings to have the remedial action set aside and it had resolved to do so.
Meanwhile, SA’s current account deficit continued to widen in the first quarter, to 2.1% of gross domestic product from 1.7% in the previous quarter. That is still less than half the 5% deficit seen a year ago, in the first quarter of 2016.
The current account deficit widened to R92-billion in the first quarter of 2017, from R76-billion in the fourth quarter of 2016, and compared with a Trading Economics consensus forecast of R85-billion.
This was based on a widening in the shortfall on the services, income and current transfer account – to R149-billion from R132-billion in the fourth quarter of 2016.
The trade surplus was sustained for a second quarter, widening from R56-billion in the fourth quarter of 2016 to R57-billion in the first quarter of 2017.
In the Reserve Bank’s quarterly bulletin, released yesterday, the bank said: “The higher trade surplus resulted from a slight increase in the value of the net gold and merchandise exports more than fully offsetting the marginal increase in the value of merchandise imports”. The value of merchandise exports declined slightly, dropping 0.2% in the first quarter of this year.
Also, SA’s terms of trade improved for a fourth consecutive quarter as the rand price of exports increased marginally while the rand price of imports decreased. — TMG