The fixed exchange rate and the backing rule confer a degree of credibility that is usually not found in the conventional pegged exchange rate arrangements. However, we must also clearly state that this credibility is obtained at a cost. In monetary policy decisions, as in most other aspects of life, there is “no free lunch”!
The decision to join the CMA was influenced by the long economic relationship with South Africa, and was perceived as the most appropriate arrangement under the prevailing circumstances. The extent to which the country has benefited from this arrangement will depend on a careful assessment of its merits and constraints. Benefits of the CMA arrangement Let me start by first analysing the benefits.