South Africa and other emerging economies are working hard to find ways to stem volatility in their markets as uncertainty persists over when the US will start hiking interest rates‚ say the Treasury and Reserve Bank.
The matter is being discussed at a Group of 20 (G-20) meeting of deputy finance ministers in Bodrum‚ Turkey‚ this week attended by Reserve Bank deputy governor Daniel Mminele and Treasury director-general Lungisa Fuzile.
The meeting will help lay the groundwork for G-20 finance ministers and leaders meetings later this year.
Expectations for a rate hike in the US‚ as Japan and the European Union take measures to stimulate theirs‚ have been causing extreme volatility in emerging markets.
Policymakers are concerned about managing such instability‚ said Mminele. “The net effect of all of this‚ (is) how it affects emerging markets‚ what policies need to be put in place to make sure we can deal with the challenges‚” he said.
His comments come as market attention yesterday fell on the statement by the US Federal Reserve’s (Fed’s) federal open market committee (FOMC) at the end of a two-day meeting‚ which is expected to offer further guidance on the timing of the first rate hike in the US in almost a decade. The dollar strengthens while the rand weakens when the FOMC suggests an earlier-than-expected rate increase. Most analysts see a marginal hike in September or November.
Rand weakness stokes inflation and increases the chances of local interest rate hikes.
Emerging-market currencies and capital inflows would experience “more weakness and volatility” if the tone of the Fed was seen as leaning towards rate hikes‚ BNP Paribas Cadiz economists said this week.
The rotating G-20 presidency is held by Turkey this year and that will help to bring the challenges faced by emerging markets to the top of the agenda. It aims to focus attention on effects of policy decisions by developed countries on emerging economies.
Fuzile said SA’s concern was for governments to focus on policies and actions that would contribute towards inclusive growth and to avoid those that would have the opposite effect.
“Policy actions that can lead to volatility will occur. (But) they need to make sure there are safety nets in the event such policies prove inevitable‚” he said.
Under its presidency‚ Turkey wants countries to commit to achieving higher levels of investment‚ inclusive growth‚ infrastructure development and the implementation of programmes agreed to.
It also wants to increase the private sector’s participation in the development of energy infrastructure‚ particularly in Asia and sub-Saharan Africa‚ according to former Turkish ambassador Ayse Sinirlioglu.
Sub-Saharan Africa was chosen because of the more than 900-million people without access to electricity in the area‚ Sinirlioglu said.
“In order to stimulate investment in these regions we could develop an action plan‚ for example putting in place a good regulatory system.”
Turkey will organise a meeting between investors and energy ministers to discuss opportunities and challenges.
Brazil‚ Russia‚ India‚ China and SA (Brics) officials met on the sidelines and were reportedly making progress on the bloc’s development bank.
G20 summit focus on market volatility
The matter is being discussed at a Group of 20 (G-20) meeting of deputy finance ministers in Bodrum‚ Turkey‚ this week attended by Reserve Bank deputy governor Daniel Mminele and Treasury director-general Lungisa Fuzile.
The meeting will help lay the groundwork for G-20 finance ministers and leaders meetings later this year.
Expectations for a rate hike in the US‚ as Japan and the European Union take measures to stimulate theirs‚ have been causing extreme volatility in emerging markets.
Policymakers are concerned about managing such instability‚ said Mminele. “The net effect of all of this‚ (is) how it affects emerging markets‚ what policies need to be put in place to make sure we can deal with the challenges‚” he said.
His comments come as market attention yesterday fell on the statement by the US Federal Reserve’s (Fed’s) federal open market committee (FOMC) at the end of a two-day meeting‚ which is expected to offer further guidance on the timing of the first rate hike in the US in almost a decade. The dollar strengthens while the rand weakens when the FOMC suggests an earlier-than-expected rate increase. Most analysts see a marginal hike in September or November.
Rand weakness stokes inflation and increases the chances of local interest rate hikes.
Emerging-market currencies and capital inflows would experience “more weakness and volatility” if the tone of the Fed was seen as leaning towards rate hikes‚ BNP Paribas Cadiz economists said this week.
The rotating G-20 presidency is held by Turkey this year and that will help to bring the challenges faced by emerging markets to the top of the agenda. It aims to focus attention on effects of policy decisions by developed countries on emerging economies.
Fuzile said SA’s concern was for governments to focus on policies and actions that would contribute towards inclusive growth and to avoid those that would have the opposite effect.
“Policy actions that can lead to volatility will occur. (But) they need to make sure there are safety nets in the event such policies prove inevitable‚” he said.
Under its presidency‚ Turkey wants countries to commit to achieving higher levels of investment‚ inclusive growth‚ infrastructure development and the implementation of programmes agreed to.
It also wants to increase the private sector’s participation in the development of energy infrastructure‚ particularly in Asia and sub-Saharan Africa‚ according to former Turkish ambassador Ayse Sinirlioglu.
Sub-Saharan Africa was chosen because of the more than 900-million people without access to electricity in the area‚ Sinirlioglu said.
“In order to stimulate investment in these regions we could develop an action plan‚ for example putting in place a good regulatory system.”
Turkey will organise a meeting between investors and energy ministers to discuss opportunities and challenges.
Brazil‚ Russia‚ India‚ China and SA (Brics) officials met on the sidelines and were reportedly making progress on the bloc’s development bank.
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