South Africa is now ‘less vulnerable,’ says central bank head

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Nyshka Chandran

Source: South Africa is now ‘less vulnerable,’ says central bank head

  • South Africa’s economy has recovered from a few years ago, Lesetja Kganyago, governor of the South African Reserve Bank, told CNBC at the International Monetary Fund’s annual meeting on Wednesday.
  • The nation “is in a much better position” to absorb shocks from global monetary policy tightening, he said.

Political uncertainty has rattled South Africa financial markets but the country’s central bank wants investors to know that economic fundamentals remain sound.

Citing improvements in the current account deficit and budget deficit as well as a positive net international investment position, South African Reserve Bank Governor Lesetja Kganyago said the economy has recovered from a few years ago.

“I’m not saying we are not vulnerable, I’m saying that we are less vulnerable,” Kganyago told CNBC on Wednesday at the
International Monetary Fund’s
annual meeting, which was held on the Indonesian island of Bali.

Around 90 percent of government debt is domestic currency denominated, with only 10 percent in foreign currency, Kganyago pointed out. Moreover, the country’s floating exchange rate means the nation “is in a much better position” to absorb shocks from global monetary policy tightening,” he added.

The
South African rand
was trading at three-week lows earlier this week after
Nhlanhla Nene resigned as finance minister
but it recovered once President Cyril Ramaphosa appointed Tito Mboweni, a former central bank governor, to replace Nene.

Kganyago expressed confidence in Mboweni’s ability to manage state finances, but cautioned against expectations of immediate action: “The new minister of finance must be given the time and space to familiarize himself with the task at hand.”