SA currency woes: Lessons from Argentina, Turkey – Economist

EDINBURGH — South Africa under the leadership of Cyril Ramaphosa has continued to lose its attractions in the eyes of the international community. He can't be blamed solely for the country's slide, although as deputy president alongside corrupt president Jacob Zuma he arguably must shoulder much of the blame for South Africa's economic woes. The Economist, a leading financial magazine, explores the cases of Argentina and Turkey for answers as to how an emerging market that has lost favour with its creditors should respond. There's no easy answer, with bad luck playing as much of a role as poor policymaking when sentiment turns negative. – Jackie Cameron

By Thulasizwe Sithole

The Economist asks: When an emerging market loses favour with its creditors, how should its government respond? Its analysts look at Argentina and Turkey, finding no clear logic to possible solutions.

Unsurprisingly, the policy prescriptions do not typically include intimidating the central bank, railing against the 'interest-rate lobby', falling out with allies, eschewing the IMF's help, pouring scorn on the dollar or appointing the president's son-in-law as finance minister. "Turkey has done all of these things, and its currency has duly lost 40% of its value this year."

Argentina, by contrast, has stuck much closer to convention, The Economist points out. "Its finance minister has two economics-related degrees. Its central bank has raised interest rates through the roof (lifting them to 60% on August 30th), and its government has secured prompt and generous assistance from the IMF, which agreed to a $50bn loan in June, the largest in its history. And yet Argentina's currency has lost over 50% of its value this year."

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