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.”