Johannesburg, STUART GRAHAM | Tuesday
THE SA Reserve Bank (SARB) did not intervene in the rand’s slide in the last quarter of 2001 because it did not want to increase the country’s forward book and expose the government to more debt, the commission of inquiry into the depreciation of the currency heard on Tuesday.
SARB governor Tito Mboweni told the commission that the forward book –which reflects all unsettled commitments of the bank – had been exposed to huge losses after the bank intervened to protect the rand in the 1996 and 1998 currency slides.
”(In) 1998 huge losses were made in the net open foreign position (NOFP).
”Consequently, because of the bank’s commitment to inflation targeting and because it did not want to increase the NOFP, the bank did not intervene in the aforegoing manner,” Mboweni said.
”Any intervention that increased the NOFP would have exposed the government to further risks of loss in the future, and consequently there would have been less money for the government to spend on the needy.”
Mboweni said the bank and treasury had regularly made known their intention to reduce the NOFP.
The commission, headed by Advocate John Myburgh, is being held in Sandton. It is expected to run until March 15, when it will adjourn for two weeks.
It was set up by President Thabo Mbeki after SA Chamber of Business chief executive Kevin Wakeford sent him a letter saying the rapid depreciation of the rand at the end of last year was suspicious.
Wakeford said individuals and institutions had enriched themselves at the currency’s expense after the rand hit record lows against major currencies in December last year.
He is expected to testify at commission’s April hearings. – Sapa
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