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...
