WHAT IT MEANS TO ESWATINI, LILANGENI

MBABANE – Eswatini’s continued heavy reliance on South Africa’s economy continues posing threat, and the latest one being the imminent crash of the currency –Rand/Lilangeni.

The crashing of the currency threat could be brought about by the pressure that is exerted by the African National Congress (ANC) that the South African Reserve Bank (SARB) be nationalised.

The threat emerged for the first time when the ANC, which voted in favour of nationalising the Bank at its 2017 elective conference, and now it, has again stated in its election manifesto last weekend that the central bank must consider the effect of monetary policy on economic growth when it decides on interest rates.

Analysts have warned that nationalising the Reserve Bank could have dire consequences for the Rand and the country’s economy and other economies including Eswatini, Namibia and Lesotho whose countries’ currencies are pegged at par to the SA currency. Simple logic dictates that a crash of the Rand will definitely mean a crash of the Loti, Namibian Dollar and Lilangeni.

loss of credibility

The analysts further made examples of what happened to the economies of Turkey and Argentina when their central banks were meddled with. They posit that the major cause of Turkey’s financial crisis which has fed fears it would spread to other emerging-market economies such as South Africa this week – was its loss of credibility.

SARB Governor Lesetja Kganyago and President Cyril Ramaphosa are strongly against the nationalisation of the bank. Kganyago told the South African media that those who think that they would like to meddle in a central bank, they only need to look at Turkey and see what the consequences of meddling with a central bank are?

He added that raising rates is the only tool central banks have to protect the value of a currency. 
A local analyst from one of the financial institutions, who chose to comment on condition of anonymity because he is not mandated to talk to the media, said if the ANC can win in its quest to have the bank nationalised, South Africa’s currency and all the others pegged at par with it can also follow suit, something that can spark a worst economic crisis.  “Due to the interference with the central bank, Argentine Peso is 37 per cent weaker against the US Dollar and the country has sought an IMF rescue package,” said the analyst.

impact on South Africa

According to Bloomberg, Turkey’s crisis had a direct impact on South Africa and the Rand last week, with the currency flirting with the R15.00/Dollar several times.
The Rand came under renewed pressure in mid-day trade on Friday, caught in a trap of broad emerging market frailty, while the local economic outlook remains gloomy with some analysts suggesting that the country may be entering a recession.

Bloomberg reported that the crisis in Turkey has the emerging world bracing for a bear market and central bankers staring down fresh complications.
Kanyago went on to say that the Reserve Bank will protect its mandate and independence as enshrined in the constitution should legislative processes on its nationalisation come to fruition.

Post your comment

Your name:

Your e-mail address:

Add your comments:

Please enter the code you see in the image:

Image:

Code: