Question

What measures should South Africa put in place to ensure that the weakening rand does not affect growth?

Answer 1

SOLUTION:

South Africa is a small open economy vulnerable to fluctuations in emerging market sentiment, and recent domestic circumstances have conspired to create a hostile environment for economic recovery.Socioeconomic conditions, he suggested, will make it more difficult for South Africa and other impacted African nations to implement the widespread shutdowns being deployed across Europe."The impracticality of implementing widespread self-quarantine in shanty towns or informal settlements mean that this will not be an option.

Measures :

While the central bank reduced its policy rate by 25 basis points in January, the real rate, which adjusts for inflation, remained above 2%, higher than the GDP growth rate.

This implies that a country requires more foreign currency than it is getting through sales of exports, and it supplies more of its own currency than foreigners demand for its products. This excess demand for foreign currency leads to depreciation in the value of a currency.