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War COVID-19 elevate global instabilities

01 Jun 2023

The risks to global financial stability have elevated due to the prolonged war in Ukraine and post COVID-19 production and supply constraints.

Global instabilities have resulted in high inflation in many parts of the world as well as geo- economic fragmentation, Bank of Botswana Governor Mr Moses Pelaelo has told the Financial Stability Board (FSB) Regional Consultative Group (RCG) meeting for Sub-Saharan Africa in Kasane on Wednesday.

He highlighted that eight countries in the region participated in a crisis simulation exercise that was facilitated by the Financial Stability Institute of the Bank of International Settlements as a way of assessing preparedness to a banking crisis in February.

The governor said the FSB RCG for Sub Saharan Africa provided an opportunity to engage on gaps in the financial sector crisis resolution frameworks. Furthermore, he said its broader agenda was to deliberate on measures that were necessary towards enhancing crisis prevention and effectiveness of bank crisis resolution in the region.

He said the meeting evaluated macroeconomic and financial sector developments that could potentially impact on financial stability or aggravate vulnerabilities.

“These include the persistence of low economic growth rates below desirable development levels necessary for inclusivity and to meet desirable development objectives; fiscal challenges and the related increase in debt burden.’’

Mr Pelaleo said these vulnerabilities included exchange rate depreciation, infrastructure gaps that constrained local economic activity, trade and prospects for digital adaptation among others. He stated that the review of the Bank of Botswana Act which commenced in February 2023 safeguarded financial stability and reduced entanglements with fiscal policy.

The governor highlighted that the Act strengthened the governance and institutional arrangements for domestic financial stability by giving Bank of Botswana a financial stability mandate which ranked second to price stability and provide for a statutory Financial Stability Council.

South African Reserve Bank governor and Co-Chairperson of the FSG RCG for Sub Saharan Africa Mr Lesetja Kganyago said the meeting was a platform for African countries to discuss financial issues and understand global outlook and developments and how they affected the African continent.

He said one of the key issues was to identify the vulnerabilities in the global financial system and whether they could potentially spill over to the African economies. Ends

Source : BOPA

Author : Portia Ikgopoleng

Location : KASANE

Event : Meeting

Date : 01 Jun 2023