South African Reserve Bank (SARB) Governor Lesetja Kganyago has cautioned that global economic fragmentation threatens stability due to certain international trade policies. He highlighted the increasing uncertainty caused by trade fragmentation and economic division, particularly citing potential impacts arising from tariff threats. Speaking before a G20 finance meeting, he stated that this heightened uncertainty disrupts global trade, posing a major challenge for policymakers worldwide.
The Governor expressed concerns that trade wars could destabilize inflation and even force central banks to reverse recent interest rate reductions, emphasizing the need for policy caution. He advised smaller, open economies to strengthen their resilience as a buffer against potential shocks. Closer to home, Kganyago addressed a proposed VAT increase in South Africa, noting the potential for an economic shock. He clarified that monetary policy would react to the knock-on effects on inflation rather than the initial shock itself. He then confirmed the dates of the next SARB meeting.