Prudent Fiscal Policy Boosts Strength of Rand
South Africa’s history of prudent fiscal decision-making is making it an attractive investment option compared to developed economies which are straining under potentially devastating fiscal uncertainty, says BoE Private Clients Economist Madalet Sessions.
Commenting on the drivers behind the current strength of the rand, Sessions says: “SA is an attractive investment destination compared to the developed world and the economy’s growth prospects compare favourably with developed markets. Years of prudent fiscal policy have resulted in a conservative debt ratio, and the SARB is a credible inflation targeting central bank.”
Sessions says that Europe’s sovereign crisis shows that monetary independence combined with prudent fiscal and monetary policy, as adopted and practiced by South Africa, offers a “vastly superior risk-reward profile to investors”.
“If SA continues these prudent policies it will remain an attractive destination for foreign investors. While the effect of not raising theUSdebt ceiling in the near-term is not yet entirely clear, it seems increasingly apparent that emerging markets with sustainable, prudent policy frameworks are likely to continue to attract capital.”
This article was originally posted on South Africa Business Communities
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