Last week I spent two days at an International Development Economics Associates (Ideas) conference in Boksburg. Ideas is a global network of progressive economists who “develop alternatives to the prevailing neoliberal economic paradigm”.
At the conference there were some of the world’s top modern monetary theory (MMT) economists who specialise in issues that affect countries in the Global South. They included Ideas Africa regional director Ndongo Samba Sylla from Senegal; Yan Liang, my favourite Chinese economist; and Simone Deos from Brazil.
According to MMT, a new school of economics in the Keynesian tradition, a monetarily sovereign country prints its own currency, borrows only in its own currency and does not promise to convert its currency into something it can run out of, such as gold or another currency.
Such countries have no financial constraints to spending and cannot run out of the currencies they issue. But MMT economist Stephanie Kelton says every economy has its own internal speed limit, regulated by the availability of real productive resources or inflation.
Some critics say MMT is not relevant to countries in the Global South because they lack internationally accepted currencies and suffer from capital flight and external or balance of payments constraints. This is partly true because many developing countries are not monetarily sovereign.
In Africa many countries have high levels of sovereign debt that is denominated in foreign currencies — the “original sin” in development finance — and 14 use a colonial currency, the CFA, which is pegged against the euro.
Over the past four decades every developing country currency crisis — from Mexico in 1982 to Sri Lanka in 2022 — was caused by a loss of monetary sovereignty after the accumulation of foreign currency loans or futile attempts to defend a currency peg.
Kelton says: “Even though the dollar is considered special because of its status as a global reserve currency, lots of other countries have the power to make their monetary systems work for their people. MMT can be used to describe and improve the policy choices available to any country with a high degree of monetary sovereignty.”
With so much spare capacity in the economy there is no reason why a country such as SA would automatically see a debasement of its currency through inflation, depreciation or punishment from international investors through a “sudden stop” of capital flows if it issued its currency to support economic development.
SA is not Senegal, Zambia or Sri Lanka. Only 10.5% of government debt is denominated in foreign currencies. Foreign ownership of government bonds declined to 24.6% in 2024 from 41.4% in 2017. SA has no foreign exchange constraint and had reserves of R1.2-trillion on August 31 2025. It has had a trade surplus since 2016.
The Reserve Bank has the macroeconomic policy tools to counter the effects of capital flight. The Bank can intervene in the bond market, as it did after the severe dislocation in financial markets in the wake of the Covid-19 pandemic.
After the largest yet “sudden stop” of capital flows to emerging markets, investors withdrew R100bn from SA financial markets. Ten-year bond yields soared to 12.4% on March 24 2020. But modest Bank bond purchases helped to reduce yields to a low of 8.6% on June 4 and create order in the market.
The Bank can also implement capital controls — as Malaysia did during the East Asian crisis in 1998 — or allow the currency to depreciate, as MMT recommends.
• Gqubule is an adviser on economic development and transformation.
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