The Reserve Bank said rising interest rates would lead to higher debt servicing costs and add pressure to household balance sheets, especially for those in the low-income bracket, as they tended to have higher levels of debt
In its latest Financial Stability Review, the Reserve Bank said rising interest rates would lead to higher debt servicing costs and add pressure to household balance sheets, especially for those is the low-income bracket, as they tended to have higher levels of debt.
Global stagflation and tightening financial conditions are some of the risks faced by the country’s financial system. The bank said the recent geopolitical issues in Europe, Including Russia’s invasion of Ukraine, were what caused the main shocks to the global financial system, leading to further disruptions to global supply chains, creating concerns about food security, among other things.
The Reserve Bank said South African financial institutions had restricted direct exposure to Russia and Ukraine, but the war could affect the country’s financial stability as growth and inflation go in the wrong direction, adding that uncertainty weighed on global and domestic investor sentiment. The global financial system was exposed to rising global debt levels, with countries like Sri Lanka defaulting on debt repayments for the first time in its history. The country is dealing with its worst financial crisis in more than 70 years. Markets viewed this as indicative of potential defaults across debt-burdened emerging economies.The bank said 80% of the increase in global debt levels came from emerging economies.
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