OWN CORRESPONDENT, Johannesburg | Friday 4.00pm
RESERVE Bank Governor Tito Mboweni on Friday robustly defended the country’s pursuit of lower inflation and dismissed calls to toss out inflation targeting in favour of a dash for growth.
Economists debating with Mboweni in a radio programme argued that employment — in a country where a third of the labour force lacks formal work — should not be sacrificed in the slavish pursuit of strict monetary policy objectives.
But he said South Africa had learned from past experience that this was a luxury it could not afford and stood up for the government’s recent adoption of inflation targets.
”The choice we have taken is to go for low inflation. We want high growth and we want to make sure that the kind of macro-economic stability policies we put in place are sufficient to attract the investment that will lead to growth and jobs.”
Finance Minister Trevor Manuel last month announced the central bank would set interest rates to bring inflation to within a band of three to six percent by 2002, from current levels of seven percent.
Mboweni subsequently said the move might have been hasty and confided that the Bank’s own targeting models would not be ready until July.
This candour provoked speculation that Mboweni and Manuel were not entirely in step on the targets.
But Mboweni stressed on Friday he endorsed their merit and would strive to meet them, taking on economists who said the targets were too tough for a fragile couontry like South Africa.
They warned that the country’s economic recovery would be jeopordised if continued higher world oil prices pressured domestic inflation and forced the Reserve Bank to hike rates, compounding the misery of the poor.
Mboweni, the country’s first black Bank governor, said he was acutely aware of the poverty that still dogged ordinary South Africans six years after apartheid’s demise.
But he said that putting a disciplined mechanism in place was the best route to success. — Reuters