Reform could further strengthen the rand, says Lesetja Kganyago

Washington — The rand has further room to strengthen if the government pushes ahead with reforms and prudent policies, Reserve Bank governor Lesetja Kganyago says.

The currency has been a top emerging market performer, strengthening about 2.5% against the dollar since the start of 2024 while most of the rand’s peers have suffered losses against the greenback.

“There should be positive momentum and that positive momentum is not going to be something just driven by the markets,” Kganyago said in an interview on Thursday on the sidelines of the International Monetary Fund (IMF) and World Bank annual meetings in Washington.

“It’s going to be whether government continues to act with resolve and stays the path in terms of prudent policies and structural reforms,” he said, adding that momentum for reform would not just bolster the currency but could also support SA’s bonds and stocks.

A few months ago, the Treasury announced a number of reforms in the energy, freight, water and telecommunications sectors, and has pledged to reduce spending and raise revenue as well as take further steps to lower borrowing over the medium-term period.

The rand has enjoyed broad gains since the ANC was forced to forge alliances with other political parties after failing to win a parliamentary majority in the May general election — its first such defeat since the 1994 election.

“If you restore investor or consumer confidence, it’s like a free stimulus for you,” he said.

Asked about efforts by policymakers to lower the inflation target from the current 3%-6% range, Kganyago said work was under way between the Treasury and the central bank on arriving at the target, and he was hopeful the process would be concluded in 2025.

“Where there is absolutely no disagreement on is that the target must be lower, but how far lower?” he said, adding that the out-of-line target meant the country was losing competitiveness.

Reuters