By Peter OBIORA InvestAdvocate

Lagos (INVESTADVOCATE) – The South African rand has been adjudged as one of the worst performing currencies in emerging market currencies in 2013, according to the International Monetary Fund (IMF).

This is coming on the heels of the Fund’s conclusion of Article IV consultation of the IMF’s Executive Board with South Africa.

“The rand has been one of the worst performing emerging market currencies in 2013,” the IMF said.

The IMF Executive Board said in recent years South Africa’s economy has underperformed other emerging markets and commodity exporters, exacerbating South Africa’s already-high levels of unemployment 25 percent (25%) and inequality, and contributing to rising social tensions.

However, IMF Board said bond yields of South Africa rose sharply in May and June as concerns over the Fed’s tapering of quantitative easing and China’s growth outlook led to rising global risk aversion and weaker commodity prices.

According to the IMF, the outlook in South Africa is for continued sluggish growth and elevated current account deficits. “Growth is projected at 2% in 2013 as weak consumption growth and lackluster private investment offset robust public investment and higher export growth. Growth is expected to rise to about 3% in 2014 and 3½% in the medium term, as infrastructure investment gradually relieves supply bottlenecks.

Also, the IMF Executive Board agreed that the monetary policy stance of the country is finely balanced and the inflation targeting framework remains appropriate.

However, they agreed that the exchange rate pass-through to inflation and wage settlements are critical factors in determining the next monetary policy move of the country and advised authorities to stand ready to adjust interest rates as needed.

They also, observed that South Africa’s highly flexible exchange rate is a considerable strength and should be maintained.

The IMF Directors further affirmed the costs of accumulating and managing foreign exchange reserves and agreed that increasing reserves will further contribute to lower vulnerabilities.

They encouraged the authorities to give consideration to regular and pre-announced auctions to buy foreign exchange as done by some other countries.

In the 2013 budget review of South Africa, the average nominal trade-weighted rand was 8.6% weaker in 2012 compared with 2011 and in real terms about 5.7% weaker and movement in the rand will continue to reflect global risk appetite and investor sentiment towards South Africa.

Pravin Gordhan, South Africa’s finance minister had told the Financial Times in an interview that there is an inability to find coherent and cohesive responses across the globe to ensure that there is reduction in the volatility of currencies in particular, but also in sentiment.

The South African rand plummeted against the dollar this year, making it one of the world’s worst-performing currencies.