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Where can South Africa get more foreign reserves?
in Economics by Platinum (113k points) | 15 views

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From international investors who invest in emerging market economies like SA because of higher returns. This is due to interest rate differentials, as well as growth potential (compared to developed countries like USA, EU – low interest rates, low growth). SA attracts investment, especially Financial derivatives and portfolio investment (but also FDI), Financing of CAD becomes a problem because SA is not high in domestic savings, thus depends on foreign financing (investment). The CA for deficit countries (like SA) then I DEFICIT (SA’s CAD was 2.4% of GDP in Q2 of 2017) but that is then matched by a surplus on the FA that finances the outflow of foreign reserves. The Financial Account surplus is needed to combat the outflow of foreign reserves. But Financial Account surplus is currently very low (SA’s was 0.3% of GDP in Q2 of 2017).
by Platinum (113k points)

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