This is the first time that the Reserve Bank included the financial distress of households and SMEs in its financial stability review.
The South African Reserve Bank says South Africa’s financial stability outlook has improved, but a number of key risks to domestic financial stability remain and an economist is worried about the sovereign debt and geopolitical risks the country will face in the future., the country’s financial system demonstrated notable resilience over the past few years, despite various global and idiosyncratic shocks.
Other factors, such as an improvement in the availability and supply of electricity, evidence of fiscal consolidation and an improved sovereign credit rating outlook, also supported positive investor sentiment towards South Africa.Key risks to domestic financial stability limiting access to a wider variety of markets which could lead to higher costs and reduced availability of funding, hedging and diversification options andmade progress with addressing the outstanding action items on the FATF’s greylist
Packirisamy says while the fiscal outlook improved since June, “several risks” to the fiscal outlook remain. “As usual, the biggest concern in this category is the financial sector’s high exposure to sovereign debt which is reported to have increased since the June 2024 FSR. Packirisamy says the deterioration in these industries could affect the financial system directly by disrupting operations and indirectly by:
“A current priority initiative is to establish direct connectivity among key nodes in the financial sector in a scenario where existing telecommunication networks are unable to function so that a certain level of payment, clearing and settlement activity can continue.”
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