Reserve Bank To Purchase Government Bonds, But It Is Not Quantitative Easing

Thebe Mabanga

The South African Reserve Bank is set to embark on an unprecedented purchase of government bonds in a bid to boost liquidity in the wake of the coronavirus pandemic.

This comes less than a week after Reserve Bank Governor Lesetja Kganyago said the bank saw no need to take extraordinary measures to mitigate the effects of the pandemic.

The bank denies that the move is Quantitative Easing, or QE, defined as the act of purchasing bonds to boost liquidity practiced by the United States and European Central Banks in the wake of the 2008 Global Financial Crisis.

A statement released by the bank on Wednesday announced: “Further amendments to the money market liquidity management strategy” and “additions to the Monetary Policy Portfolio”.

The amendments are in addition to measures announced on the 20^th of March, which comprise additional daily and a new weekly auction for repurchasing by