The South African Reserve Bank (SARB) stated on Wednesday (10) that the country’s financial system is expected to remain resilient, despite the worsening of financial conditions and the tightening of monetary policy resulting from the war in Iran.
Africa’s largest economy began to gain momentum last year, and investor sentiment improved amid signs of fiscal discipline. However, the conflict in Iran has dampened the short-term outlook by impacting oil markets, capital flows, and household finances, according to Reuters.
“The shock caused by rising oil prices is expected to continue exerting inflationary pressure, potentially leading to a more restrictive monetary policy than anticipated before the conflict,” the SARB states in its Financial Stability Review, a semi-annual report assessing the health of the financial system.
The bank’s quarterly projection model now points to a further interest rate hike in 2026, following the 25-basis-point increase decided at the May 28 monetary policy meeting. According to the report, households most sensitive to interest rates are unlikely to benefit from the relief expected at the start of the year.
The central bank also notes that, in addition to the immediate impact of the conflict in the Middle East, advancements in cutting-edge artificial intelligence (AI)—notably Anthropic’s Claude Mythos Preview model—also pose risks to financial stability.
“Cyber risk is no longer limited to sporadic and largely controllable events, but has become a continuous and cumulative threat,” the document adds.
Other identified risks include capital outflows amid heightened market uncertainty, the deterioration of public finances, and the worsening of households’ financial difficulties.
“Despite these risks, the South African financial system remains, on the whole, resilient,” the central bank concludes.
South Africa’s foreign exchange reserves currently exceed 16% of Gross Domestic Product (GDP), the highest level since the early 1960s, and also meet all major international indicators of reserve adequacy.
