Johannesburg - A decision by the South African Reserve Bank (Sarb) to keep the repo rate unchanged has given the country’s struggling economy breathing room.
This is the view of the National African Federated Chamber of Commerce and Industry (Nafcoc) reacting to Sarb governor Lesetja Kganyago’s announcement last week.
On Thursday, Kganyago announced that the bank's monetary policy committee decided to leave the interest rate unchanged.
This means the repo rate, which is the interest rate at which the Sarb lends money to commercial banks, remains at 7%. The cost of borrowing stays at 10.5%. Sarb’s call came amid the consumer price index being 6.0% in July 2016, down from 6.30% in June.
"This monetary stance by the Sarb provides a breather and must be used by the fiscal authorities to give impetus to measures aimed at generating economic growth and restore confidence in the economy," said Landiwe Mahlangu, Nafcoc chief economist, in a statement.
Nafcoc further said “this monetary stance by the reserve bank is prudent particularly in the light of current economic climate and very adverse headwinds”.
Kganyago further upgraded Sarb’s outlook for South Africa’s 2016 gross domestic product growth. Sarb now expects the economy to grow by 0.4% rather than the previously forecast 0%.
Meanwhile, Nafcoc said in its statement that the upcoming medium term budget policy statement in October “will therefore be critical in this regard”.
“Nafcoc therefore is of the view that there must a concerted action to minimise this damaging institutional and societal conflict in order to regenerate our economy,” said Nafcoc in a statement.
“Nafcoc believe that support to SMME and refrain from anti-business practice lies at the heart of regenerating our economy,” said Nafcoc.
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