Bloomberg/Simon Dawson

Economy

South Africa's rand held back by political uncertainty, IMF

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While most polls are predicting a comfortable win for President Cyril Ramaphosa in the 8 May general election, he faces difficulties introducing reforms to stimulate the economy, consolidate spending and reduce corruption.

Monday 15, April 2019

(Bloomberg) --Political uncertainty is probably depressing the value of South Africa rand, according to the Head of the International Monetary Fund’s (IMF) Africa department.

Abebe Selassie, the Head of the International Monetary Fund’s (IMF) Africa Department, said, “South Africa’s fiscal and monetary policy has been as good as it gets, it’s more on the structural side that attention is needed and its more about getting confidence in the private sector to invest.”

Ramaphosa’s rise to power to replace Jacob Zuma after a scandal-ridden tenure of almost nine years initially boosted confidence in the rand, but the currency has slumped back to the levels seen before the change in leadership.

“The rand is of course among the most freely floating currencies in the emerging-market universe, subject to the ebbs and flows of sentiment, our view is that there is nothing awry with the calibration of macro policies,” Selassie said.

The rand weakened sharply last year as rising interest rates in the US put pressure on emerging markets including Argentina, Turkey and South Africa, however the currency has gained about three per cent against the dollar so far this year.

The IMF this week downgraded its forecast for global growth to the slowest pace since the financial crisis. The fund cut its outlook for South Africa to 1.2 per cent growth this year, down from 1.4 per cent projected in January.

The fund projects sub-Saharan Africa’s economy will grow 3.5 per cent this year, accelerating to 3.7 per cent next year. Growth in the region is being held back by the relatively slow expansion in major economies including South Africa, Nigeria and Angola, added Selassie.

 

TAGS : South African Rand, President Cyril Ramaphosa, EM, IMF, Jacob Zuma

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