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South Africa’s net reserves slightly up in July

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South Africa’s net gold and foreign exchange reserves rose marginally to $34.672 billion in July, data showed on Friday, largely due to the Treasury withdrawing loans deposited at the central bank.

The net liquidity position edged up from $34.574 billion in June, the central bank said in a statement posted on its Web site.

Gross reserves dipped by $13 million to $35.747 billion last month, suggesting the Reserve bank did not take advantage of a relatively strong rand to build up its dollar reserves.

The rand was at 7.8050 against the dollar at the end of July, weaker than a month before but at levels central bank Governor Tito Mboweni said in June may be seen as unwelcome.

The central bank has been steadily building up reserves over the past 5 years after it brought a long-standing negative position into balance in 2004, although the pace has slowed since the rand weakened sharply late in 2008 amid global market turmoil.

Gross reserves still lag those in other emerging economies, a concern given the country’s large current account deficit, at 7 percent of GDP in the first quarter of 2009.

“There was no surprise in the numbers,” Absa Capital macro strategist Ian Marsberg said. “It doesn’t seem like there was any significant activity from the Reserve Bank to try and shore up reserves.”

Net foreign currency holdings were up $11 million at $31.997 billion, while gold reserves were down by $24 million to $3.75 billion due to a slight fall in the price of the precious metal.

Foreign deposits held at the central bank declined by $109 million to $426 million, with the government withdrawing money to meet foreign exchange obligations.

The Treasury had deposited with the central bank a portion of $1.5 billion raised through a foreign loan.

South African tax revenue is expected to fall far short of a budgeted forecast for 2009/10, pointing to a budget deficit wider than the estimated 3.8 percent of GDP and limited funds to help the central bank cover the cost of building reserves.

Source: Reuters

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