South Africa: The Financial Sector-Sovereign Nexus

Author/Editor:

Heiko Hesse ; Ken Miyajima

Publication Date:

March 4, 2022

Electronic Access:

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Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary:

Globally, financial institutions have increased their holdings of domestic sovereign debt, tightening the linkage between the health of the financial system and the level of sovereign debt, or the “financial sector-sovereign nexus,” during the ongoing COVID-19 pandemic. In South Africa, the nexus is still relatively moderate, albeit rising, and the increased focus of the Prudential Authority on the associated risks provide reassurance. Options to mitigate such risks through the use of regulatory measures can be explored. However, absent the necessary fiscal consolidation and structural reforms, risks from the nexus to both the financial system and the sovereign will increase.

Series:

Working Paper No. 2022/051

Subject:

Frequency:

regular

English

Publication Date:

March 4, 2022

ISBN/ISSN:

9798400204418/1018-5941

Stock No:

WPIEA2022051

Pages:

21

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