South African Finance Minister Pravin Gordhan said the government's efforts to ensure a competitive exchange rate, including a buildup of reserves and fewer exchange controls, were having the desired effect.
The rand has fallen 3.3 per cent against the dollar this year, trimming its gains against the US currency since the beginning of 2009 to 37 per cent. Labour unions and businesses have called on the government to do more to weaken the rand, saying the currency's strength is undermining exports.
"Policy measures implemented thus far have helped to prevent further nominal appreciation" of the rand "despite the fact that aggregate capital flows have remained positive," Gordhan said in a written reply to a parliamentary question circulated via e-mail Wednesday.
"Fiscal and monetary policy have been adjusted to support the economic recovery. Real interest rates remain low and supportive of growth."
The rand traded at 6.8536 per dollar at midmorning in Johannesburg, up from 6.8764 late Tuesday.
South Africa's exchange rate policy has to take into account "the national interest," Gordhan said.
"If we spend more on reserve purchases, we either need to borrow more or spend less on something else," he said. "If we impose capital controls, we risk raising the cost of domestic capital and not have enough inflows to finance the current account deficit."
South African manufacturing output increased 0.6 per cent in May, the government statistics agency said , less than the 2.4 per cent median estimate of 15 economists surveyed by Bloomberg.
"There are a lot of pressures on manufacturing; lack of demand from Europe, uncertainty in the global economy, the overvaluation of the rand, competitiveness issues," Gordhan told reporters in Johannesburg.
From / Gulf News