Time was needed to recover from the shocks of 1996 when foreign capital inflows suddenly subsided and left the overall balance of payments with a R5 billion deficit.
In the process, the country’s official foreign reserves declined to the extremely low level of less than R14 billion (in September 1996), and the average effective exchange rate of the rand depreciated by 23.2 per cent from February to October 1996. Monetary policy, which was tightened considerably during the course of 1996, had to remain restrictive throughout the major part of 1997.