Gordhan speaks out on impact of US bonds decision

South African Minister of
Finance Pravin Gordhan
has reacted strongly to the
US’ intention of launching
a second round of buying
government bonds
saying it will have severe
consequences for exports
from developing countries.
America earlier this
month announced its
intention to buy $600
billion worth of government
bonds in an effort to
make loans cheaper and
encourage Americans to
spend more.
“The move by the USA
will force developing
nations to take more
steps to mitigate the
impact of the increased
flows into their financial
markets,” said Gordhan in a
statement. “As has been the
case so far, most of
the $600 billion that the
Federal Reserve will pump
into the USA’s economy
will find its way into
the financial markets of
emerging market countries
where these dollar flows
will have the effect of
strengthening emerging
market currencies, with
devastating consequences
for exports from developing
countries.”
Gordhan, who was
recently in Seoul in South
Korea attending a G20
summit, says developing
countries will bear the
brunt of the US decision to
open its flood gates without
due consideration of the
consequences for other
nations.
In a written response
to Parliament last week
Gordhan said confronting
the USA over global
imbalances and currencies
would, however, not solve
the problem.
“If we are to repair the
global economy, all nations
must find the right balance
between measures aimed at
protecting national interests
and globally coordinated
policies.”