High interest rates may be a blessing to SA

ED RICHARDSON
THE LOW commodity prices and higher interest rates may be good for the country – according to finance minister Trevor Manuel. Addressing the National Assembly recently, Manuel said the low commodity prices might reduce the country’s vulnerability in the global economic environment by reducing the domestic imbalances that were created by the commodity price cycle. The minister expressed concern over SA’s expanding credit use especially for household credit to finance consumption and the rising debt levels of non-financial businesses. At the release of the May 2006 Business Confidence Index, the South African Chamber of Business (Sacob) said higher interest rates in the country could help defuse a possible crisis in the economy. According to Sacob, the increasing deficit on the current account of the balance of payments may result in a debt crisis that may cause the rand to weaken further and inflation to rise.