South African Finance Minister Trevor Manuel said on Monday the prospects for a stable rand were increasing following last year’s steep fall and a partial recovery against the dollar this year.
He told reporters ahead of a parliamentary finance committee meeting that one positive factor was the central bank’s decision in October last year to stop buying up dollars to reduce its foreign exchange liability, known as the net open forward position (NOFP).
”The Reserve Bank had been mopping up dollars in order to reduce the NOFP… but it is no longer going to do that. It does mean that we’re likely to see prospects for stability increasing,” he said.
Cranked up to $23.2-billion at the height of the 1998 emerging markets crisis, the NOFP has since been reduced to $1.9-billion. The central bank is now using bond issues and privatisation proceeds to wind it down.
Manuel said there was also a likelihood of realignment between major currencies such as the dollar and euro and between the dollar and some of the more liquid emerging market currencies such as the rand.
”The key is stability and that you can only achieve by on-going communication with the markets on what we are doing and why, what the underlying rationale is for why we conduct ourselves in a particular way,” he said.
Treasury director general Maria Ramos said a US bond launch earlier this year and income expected from the listing of a portion of the Telkom telecommunications utility meant there was little pressure to further reduce the NOFP.
She said the 10-year $1-billion global bond launched, at 240 points above the equivalent US Treasury Bond rate, had been the most successful yet.
”We have no plans to do any further foreign borrowing. We expect to do the privatisation, the IPO for Telkom in the course of this fiscal year, so there isn’t really great pressure to reduce the NOFP. We don’t really need the money,” she said.
Telkom IPO best in calendar 2002
Ramos said that the government would prefer to carry out the IPO — the state’s biggest privatisation effort — in calendar 2002, but was committed to doing it in the fiscal year to March 2003.
”The commitment is very much there to do it this (fiscal) year and we’re not going to walk away from that,” she said.
”We’re looking at the market as it is and saying how do we do this transaction given the market as it stands at the moment? We’re not looking to the market to see major improvements in it,” she added.
Ramos said a focus for the treasury in the coming year would be to further reduce the public float and to harmonise revenue and expenditure.
She said the government had reduced its float to between R800-million and a R1-billion rand at any one time, which had introduced significant savings on interest. ? Reuters