Scrap remaining forex controls, says Mboweni

SA’s remaining foreign exchange controls have become “purposeless” and the national treasury should abolish them, Reserve Bank governor Tito Mboweni said yesterday.

His views appear to be at odds with government policy of gradually relaxing exchange controls. In the mid-term budget unveiled by Finance Minister Trevor Manuel two weeks ago, offshore investment limits for banks and fund managers were eased, but the individuals’ allowance of R750,000 was left unchanged.

Manuel is on record as saying that the further easing of foreign exchange controls would be dealt with in “the passage of time” — suggesting a gradual and considered approach.

Mboweni has shown some impatience with this approach, saying: “For all intents and purposes exchange controls have become purposeless … the cost of exchange control administration and the inconvenience that goes with managing (it) might not be worth the exercise.”

Departing from a speech prepared for presentation at the annual Bureau for Economic Research conference, Mboweni said the potential benefits of sustaining exchange controls had become unclear.

Further relaxation of exchange controls could in fact boost confidence in the country as an investment destination and prompt inflows of foreign capital rather than the feared outflows, he said.

Mboweni also said he was opposed to “artificially low” interest rates and an inflation target that was too flexible, steps the Bank has been urged to take to boost economic growth and create employment.

Mboweni repeated his recent call for a more flexible labour market, but pointed out that the status quo was considerably more flexible than the “labour market inflexibility of the mad type” that prevailed during apartheid.

Source:Dave Marrs Scrap remaining forex controls, says Mboweni Business Day, 10 November 2005

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FMF Policy Bulletin/ 15 November 2005
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