South Africa should be prepared to intervene in the foreign exchange market to keep its currency stable and “competitive”, and should maintain its inflation targets, a group advising the government said. In its report released on Thursday, an international panel - known as the Harvard Group - also suggested a budget surplus of between 1 and 2 percent to help ease inflation and for exchange controls to be scrapped. The international panel, known as the Harvard Group, were asked to assess South Africa's economic policies and propose ways to boost growth and cut unemployment. “Maintain the current inflation targeting regime but adopt a strategy that pays more attention to the level and stability of the real exchange rate,” it said. “This involves the use of SARB (South African Reserve Bank) statements on the exchange rate when it deviates from what the bank considers compatible with external and internal balance. In addition, it (SARB) should be willing to intervene to back up its statement.” The group did not give a recommended level for the currency. The Treasury stressed that the report, submitted in 2007, did not reflect government views and that it had neither adopted nor rejected any of the recommendations. However, Finance Minister Trevor Manuel and central bank Governor Tito Mboweni have, in the past, dismissed proposals to intervene. The rand has weakened by about 10 percent against the dollar this year to around 7.60.
