Any suspicion that the currency is over-valued tends to be an important deterrent to the inflow of capital. The nominal trade-weighted value of the rand has declined by 28% from 1995 to 1999, or on average by about 7% per year. This depreciation exceeded the inflation differential between South Africa and its main trading partners and competitive countries.
In some cases this burden was compounded by the adoption, earlier in the crisis, of discretionary fiscal stimulus measures and the parallel decline in government revenues caused by the economic downturn. In countries where the emergence of systemic risk originated in large fiscal imbalances, the deterioration of public finances weighed negatively on the market pricing of government bonds from these countries.