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Johannesburg - If Europe’s debt crisis spreads to that region’s banking sector, the contagion effect would be inevitable and South Africa could be further affected, Finance Minister Pravin Gordhan said on Wednesday.
Gordhan said however domestic financial institutions’ exposure to Greek debt was still relatively low.
In an article in the Financial Mail magazine, Gordhan said the International Monetary Fund needed to address the concerns of developing countries if contagion did affect their economies.
“Notwithstanding the establishment of the European Financial Stability Facility, more is required,” Gordhan said.
“The IMF needs to increase its firepower substantially to devise a rescue package, and perhaps leverage its resources, to prevent the crisis from spreading and to address the concerns of developing countries, which are innocent bystanders, should the contagion affect their economies,” Gordhan said.
Emerging market economies have been hard hit by Europe’s debt crisis.
The rand has been rendered extremely volatile by the uncertainty over the eurozone crisis and Gordhan has said the government is at a loss about how to stabilise the currency.
South Africa is particularly vulnerable to toxic effects of the eurozone debt crisis because its current account deficit is primarily financed by international capital flows and the region is a major trading partner.
Gordhan said however domestic financial institutions’ exposure to Greek debt was still relatively low.
In an article in the Financial Mail magazine, Gordhan said the International Monetary Fund needed to address the concerns of developing countries if contagion did affect their economies.
“Notwithstanding the establishment of the European Financial Stability Facility, more is required,” Gordhan said.
“The IMF needs to increase its firepower substantially to devise a rescue package, and perhaps leverage its resources, to prevent the crisis from spreading and to address the concerns of developing countries, which are innocent bystanders, should the contagion affect their economies,” Gordhan said.
Emerging market economies have been hard hit by Europe’s debt crisis.
The rand has been rendered extremely volatile by the uncertainty over the eurozone crisis and Gordhan has said the government is at a loss about how to stabilise the currency.
South Africa is particularly vulnerable to toxic effects of the eurozone debt crisis because its current account deficit is primarily financed by international capital flows and the region is a major trading partner.
