This depreciation, together with the 98 basis point increase in the yield on the R186 benchmark government bond and the 60 basis point widening in the country’s five-year credit default swap spread illustrate the vulnerability of South African financial assets to the changing world environment I have just described. Why has this happened?
We believe that the financial support policies in response to the COVID-19 are phased policies. Therefore, regarding policy design, focus should be placed on ensuring incentive compatibility and fending off moral hazards. We should pay attention to the “aftereffects” of the policies, keep the aggregates at appropriate levels, and consider in advance the reasonable timing of exit for the policy tools.