Bank chief urges freedom for rand
Hugh Pope on the case to relax exchange controls
Wednesday 22 February 1995
Since last year, foreign reserves had strengthened to about 12bn rand (£2.1bn) and South African interest rates were closer in line with the rest of the world, Dr Stals said. There had also been a fall in foreign holdings of the key exchange control instrument, the financial rand, which was within 10 per cent of the currency's market value.
President Mandela has said the financial rand will be dropped soon. Dr Stals declined to comment on timing, saying only that "there has been so much speculation in the markets that one day they will be right".
The Reserve Bank followed international interest rates up yesterday by lifting its discount rate 1 per cent to 14 per cent. Dr Stals said the move was a vital signal of tight monetary policy needed to control a 16 per cent expansion in the money supply last year, well above last year's 9.9 per cent rate of inflation. Money supply had been boosted mainly by a boom in credit to consumers and the private sector.
Rather than triggering an outflow of funds, Dr Stals thought it more likely that freeing exchange controls would initially bring an inflow of funds from banks and institutions keen to invest in South Africa and profit from interest rates well above the rate of inflation. But the bank still needed more reserves in case that capital suddenly took fright.
The Reserve Bank was already buying dollars in a fight to prevent the rand from appreciating too fast against world currencies, Dr Stals said. The financial rand was trading at about 3.83 rand to the dollar yesterday, compared with a commercial rand rate of about 3.53.
Dr Stals said the biggest outflow was likely to come from South African insurance and mutual funds. The biggest four institutions alone held 400bn rand in investments but had not one cent invested abroad. Exchange controls for private residents who wished to transfer money abroad would probably be the last to go, he added.
The financial rand was introduced to protect the South African economy from sanctions and capital outflows during the years the world isolated the country because of its racist apartheid policies.
- 1 Husband creates spreadsheet detailing wife's 'excuses' for turning down sex
- 2 UK pirates will get four warning letters a year
- 3 Saneie Masilela, 9, marries Helen Shabangu, 53 years his senior, for the second time
- 4 Time runs out for Christian Iraq: Isis deadline passes with mass flight
- 5 Why I'm on the brink of burning my Israeli passport
Saneie Masilela, 9, marries Helen Shabangu, 53 years his senior, for the second time
Time runs out for Christian Iraq: Isis deadline passes with mass flight
Miley Cyrus death hoax: Fans distraught after Facebook scam goes viral and she doesn't tweet for three days
Malaysia Airlines MH17 crash: France and Germany accused of going soft on Putin as sanctions talks stall
Israel-Gaza conflict: Deadly flechette shells 'used by Israeli military in Gaza Strip’
Malaysia Airlines flight MH17 crash: 'Nine Britons, 23 Americans and 80 children' feared dead after Boeing passenger jet is 'shot down' near Ukraine-Russia border
Malaysia Airlines MH17 crash: Vladimir Putin is given 'one last chance' to end hostilities in Ukraine
The truth about conspiracy theories is that some require considering
Malaysia Airlines MH17 crash: Ukrainian military jet was flying close to passenger plane before it was shot down, says Russian officer
Malaysia Airlines MH17 crash: victims’ bodies bundled in black bags and loaded onto trains
Malaysia Airlines MH17 crash analysis: A tragic lesson of advanced weapons in the wrong hands
- < Previous
- Next >
iJobs Money & Business
£28000 - £32000 per annum + benefits: Ashdown Group: Training Programme Manage...
£28000 - £32000 per annum: Ashdown Group: Training/Learning and Development Co...
£40000 - £50000 Per Annum: Clearwater People Solutions Ltd: Business Analyst r...
£500 - £550 per day: Orgtel: BA/PM - Client Data London (Greater)