late. global growth in 2015 was driven by the advanced economies and in particular by the sustained recoveries in the united states and united kingdom. the us experienced higherthan - expected growth in the third quarter, which, together with robust domestic private demand and job creation, allowed the fed last month to finally embark on its much anticipated lift - off as part of policy normalisation. market participants viewed the fed ’ s statement following the december fomc meeting as somewhat dovish, reinforcing the gradual prospective path of normalisation. furthermore, as demonstrated by the fomc ’ s “ dot plots ” over the last few fomc meetings, the range of the projected target federal funds rate has narrowed, signifying a more clearer and coherent path of normalisation. such perceived moderation of the fed ’ s expectations, together with ample advance notice through its communication strategy, no world economic outlook, imf, october 2015. bis central bankers ’ speeches doubt helped markets digest the dreaded “ first hike in the cycle ” ( the first increase in the fed funds target in almost ten years ) without major price swings. in japan and the euro area, however, growth remains weak and fragile. the euro area expanded by an annualised 1. 2 per cent in the third quarter, and indicators ranging from business confidence to credit growth are showing increasing signs of upward normalization. however, concerns over a lack of pricing pressures 2 prompted the ecb to lower its deposit rate and extend its qe programme last month. on the other hand, even as japan avoided a technical recession in the third quarter, inflation remains well below its 2 per cent target level. going forward, it is anticipated that growth in advanced economies will strengthen on the back of supportive fiscal and accommodative monetary policies and lower commodity prices. however, weaker growth in emerging markets and resultant feedback loops, harbour downside risks. emerging market growth continued to disappoint in 2015, with the slowdown in china, recessions in brazil and russia and weak commodity prices dominating the outlook going forward. china continues to rebalance its economy, and according to the imf is expected to have grown by 6. 8 per cent in 2015, and achieve growth of 6. 3 per cent in 2016. 3 monetary policy continues to support the economy, with the people ’ s bank of china reducing the policy rate by 165 basis points in 2015, and new fiscal measures announced in 2015 should help shore up demand and avoid a hard landing

equal to the repo rate, at 3. 5 % currently, and profit from the spread. borrow at 3. 5 % and lend at 9 % – what a great business model! fortunately, the sarb is driven by public interest and not by profit. and, clearly, there are some risks embedded in this pricing, or private buyers who do look for profits would have eaten this ‘ free lunch ’ already. in fact, if we intervened to bring down long yields, we would be transferring risk back to the public balance sheet, while also removing incentives for new lending to the public sector. one of south africa ’ s fiscal advantages is that the average maturity of government debt is unusually long relative to its peers. at the start of this year, it was a bit over 12 years. the whole point of borrowing long - term like this, even though it costs a bit more, is to share risk with investors. this means that when things like the coronavirus and credit rating downgrades happen, bond prices fall and borrowing costs go up – but this debt need not be rolled over at higher interest rates, because government has already received the funds, long - term, at the old interest rates. the risk is shared. should the sarb start doing qe, however, by buying bonds on the secondary market, then investors could shift risk back onto the public sector ’ s balance sheet, at a higher price. in other words, it would be a private sector bailout, arranged by the sarb. worse, qe would reduce the incentives for new investors to come and buy long - term sovereign debt, because there would not be enough yield or compensation for the longer - term risks now visible. what happens with qe, instead, is that public borrowing switches to the short - end of the curve. as the central bank buys longer - term bonds, it also sells, to the private sector, short - term instruments in their place, with the net result that the only new debt the private sector ends up with is that short - term debt. given that our short - term instruments, like sarb debentures, are much like treasury bills, it turns out that qe is much less exciting than it looks. not only can national treasury effectively make its own qe by funding itself through treasury bills, but it is actually doing so. 12 its precrisis borrowing strategy was astute : it left room in the short - end of the yield curve to