STATEMENT ISSUED BY MR C.F. LIEBENBERG, MINISTER OF FINANCE, ON THE ABOLITION OF THE FINANCIAL RAND SYSTEM.The financial rand or dual exchange rate system as applied in South Africa at this stage had its origin in the exchange control measures introduced on 1985-09-01 to provide some protection to the domestic economy from the adverse effects of large capital outflows at that time. The measures then introduced provided for: (i) a moratorium or temporary standstill on the repayment of about 60 per cent of the foreign debt of South Africa; and (ii) a restriction on the convertibility into foreign currency of the local sale proceeds of non-resident owned South African investments. These proceeds had to be retained in South Africa with South African authorised dealers in foreign exchange in the form of financial rand balances. Such balances were made freely transferable between non-residents and were also eligible for reinvestment in South African quoted securities and in other equity investments "as the authorities may determine from time to time". The debt standstill arrangements, which in the beginning were applied to a total amount of US $13,6 billion, formed the subject of a series of subsequent Interim Debt Arrangements entered into between South Africa and its foreign creditors, providing for a gradual reduction in the amount of "affected indebtedness". In September 1993, when the amount still subject to these arrangements had declined to just more than $4 billion, a final rescheduling arrangement was entered into with foreign creditors, providing for the full redemption of the outstanding balance over the period 1994 to 2001.The financial rand system, however, remained in force. Over the past year, and particularly since the Government of National Unity came into power in May 1994, South Africa's position in the international money and capital markets has changed dramatically. International punitive actions such as economic sanctions, investment restrictions and forced loan withdrawals have been repealed and South Africa has again been accepted as a normal member of the international community. Since the middle of last year, persistent net capital inflows into the country have exceeded an emerging deficit on the current account of the balance of payments and have enabled the Reserve Bank to redeem part of its own foreign borrowings, and to replenish its depleted foreign reserves. Today, the Bank not only holds about R12,5 billion of foreign reserves, but has also established foreign credit lines of about R16 billion, of which about R13 billion is unutilised at this stage. Recently, the rates of exchange for the commercial and for the financial rand have started converging and the discount of the financial rand on the commercial rand has been below 10 per cent now for more than three weeks. These rates have, of course, been influenced by speculative transactions, but nevertheless indicate that only minor adjustments will be required now for a merging of the two rates. Although the financial rand system has served South Africa well during the years of the country's economic isolation, it has many disadvantages and, in normal times, may even discourage new foreign investment in the country. The Government, supported by the Reserve Bank, is of the opinion that the underlying financial situation has now improved sufficiently to warrant the abolition of the financial rand system. The Government has therefore decided that, as from Monday, 1995-03-13, the exchange control restrictions on the free convertibility and repatriation of the local sale proceeds of non-resident owned South African investments will be repealed. The financial rand and the dual exchange rate system will thereby effectively be terminated. As from Monday, 1995-03-13, South Africa will therefore have only one unitary exchange rate that will apply to both current and capital transactions between residents and non-residents. This one and only exchange rate will, as was the case in the recent past with the commercial rand exchange rate, be determined by mark