Economist advises against rand manipulation

‘Too dangerous despite need for weaker currency’ ALAN PEAT SHOULD THE monetary authorities try to weaken the rand – with the currency at a worryingly high level against the US dollar, especially for SA exporters and their international freight partners? That’s part of the feelings expressed to FTW about the current economic and financial state-of-play in SA by Gerd von Mansberg, CEO of general sales agent (GSA) The Cargo Connection. He sees R7-7.50 to the US dollar as the ideal. But is that desirable? Is it even possible? Sacob economist, Richard Downing agrees that the rand is too strong. But, at the same time, the consensus amongst economists would be that the monetary authorities should not interfere, and let the market dictate the level. But he also feels that the inflow of capital is messing up the BoP, and that importers are benefiting too much – as the 14-15% real growth in imports reveals, compared to exports’ poor performance percentage-wise. “Obviously,” Downing added, “interest rates could play a role.” But he’s hesitant about the proposed R7-7.5/US dollar level – suggesting that inducing a drop to that level would be “dangerous”. He suggests that fixing a level is not easy, although one measure would be to bring the BoP into balance. Economists have tried to work out a viable level, but haven’t really found the right formula to achieve this without risk. “I don’t think there’s a straight answer,” said Downing. He also feels that the SA Reserve Bank – where the monetary policy committee (MPC) fixes the rates – is in a predicament with the strong rand. “But I think they could still bring down the interest rates,” said Downing.