The Reserve Bank of South Africa (SARB) has warned of risks to South Africa’s financial stability from capital outflows and the possibility of sanctions following an accusation by a US diplomat of supplying Russia with weapons to help its campaign in Ukraine.
THE WARNINGS COMES AFTER ALLEGATION OF SUPPLYING WEAPONS TO RUSSIA
The Reserve Bank of South Africa said in its semi-annual health check on Monday that these risks, together with the threat of grid failure due to repeated power cuts and persistently high inflation, have increased systemic risks to the Finance system.
“The risk of secondary or indirect sanctions being imposed on South Africa if its neutral stance in the Russia-Ukraine war is perceived as unconvincing has increased since the previous FSR.
“If this risk materialises, the South African financial system will not be able to function if it cannot make international payments in USD and could lead to a sudden stop in capital inflows and a surge in outflows.”
warned the FSR.
THE SANCTION TO SA WILL MAKE IT IMPOSSIBLE TO FINANCE ANY FLOW OF TRADE OR INVESTMENT…’
Sanctions on South Africa would make it “impossible to finance trade or investment flows, or to make or receive payments from correspondent banks in USD,” according to the report.
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He He said the country’s national financial institutions and financial system remained resilient amid the recent turmoil in the global banking sector, but a combination of global and local factors could test their strength beyond the next 12 months.
SOUTH AFRICA WAS ACCUSED OF SUPPLYING WEAPONS TO RUSSIA
These local troubles were followed in early May by a diplomatic standoff with the US when one of its diplomats accused the country of supplying Russia with arms, sparking fears of sanctions and a sharp drop in the rand.
Meanwhile, the recent furor over accusations by the US ambassador to South Africa, Reuben Brigety, that South Africa was supplying Russia with arms despite its stated policy of non-alignment has sparked a debate over whether the country’s arms control country is lax, not compliant. and lacks supervision.
The debate was further fueled by the South African government’s reluctance to provide clear answers to questions about what the Russian freighter Lady R came to deliver, or pick up, from South Africa in December 2022.