Some Empirical Observations

In the past several years, South Africa has taken a number of steps, such as budget-deficit reduction and adoption of a more flexible exchange rate regime, that have helped reduce its vulnerability to adverse external shocks. In addition, the SARB has made considerable strides in reducing the net open forward position (NOFP), which has represented a major source of external vulnerability, has been lowered significantly. The NOFP, however, remains relatively large. As such, it continues to represent a source of concern to investors that is reflected in South Africa’s sovereign risk spreads. The SARB has, therefore, expressed its commitment to...