UNITED DEMOCRATIC MOVEMENT
STATEMENT ISSUED BY
The general trend set by Mr Tito Mboweni yesterday on how he will approach future monetary policy decisions, is to be welcomed.
In its economic policy document and Election Manifesto, the UDM stated the need for a more democratic “Monetary Policy Committee” system. We are glad that Mr Mboweni has taken this idea aboard, because this will promote a balanced approval to monetary policy, taking inflation and currency levels and growth rates relative to other developing countries and emerging markets as norms.
The Governor may have gone one step further to also include important economic stakeholders as non-voting members on this Monetary Policy Committee.
The UDM has also pleaded in its economic policy document and Election Manifesto for an end to the protection of the currency. We welcome the statement by the Governor not to use our reserves to protect the SA currency. At the same time we hope that he will also not use drastic interest rates hikes as a tool against currency market speculators.
We welcome the stance by the Governor that periodic market driven adjustments in the rand versus the currencies of advanced economies will not be met by panicky responses.
Inflation targeting is needed in South Africa. The question is within what range and within what time frame? It has to been seen how the SA Reserve Bank will achieve its informal target of 1% -5% for core inflation from its present level of over 8%. At least we are moving in the right direction and the UDM will encourage open discussions on this issue.
The UDM support the Governor to reduce the large forex book of the central bank. This is what the UDM has called for in its policy. We simply cannot effectively globalise our economy in a balanced way when the central bank carries such a large forward forex book.
Mr Mboweni’s major task will be to help to ensure stability in our economy. We must eliminate fluctuations as far as possible. This will be his biggest test in formulating monetary policy.
What we hear from the Governor sounds good. He must know however, that he will only be tested in times of crisis.
More important what the Governor has said today, however is that South Africa now needs economic growth, which will stimulate job creation. This is the single most important item on our agenda as a Nation. The growth in our Gross Domestic Product (GDP) of only 1,7% for the second quarter of this year, announced yesterday, is insufficient. The government has the responsibility to create conditions in SA that will accelerate economic growth, and thereby providing jobs to our people.
25 August 1999