JOHANNESBURG — Central Bank Governor Lesetja Kganyago has highlighted potential upward pressures on South Africa's inflation, particularly from global oil prices and tightening financial conditions worldwide. Speaking at the International Monetary Fund and World Bank spring meetings in Washington, Kganyago pointed out the risks despite recent data suggesting a modest decline in inflation rates.

In the latest statistics released on Wednesday, South Africa's headline inflation decreased to 5.3% year-on-year in March, down from 5.6% in February, slightly below what analysts had predicted. However, the South African Reserve Bank (SARB) anticipates that inflation will not stabilize at the 4.5% midpoint of its target range until the end of 2025, which is later than previous estimates.

Governor Kganyago indicated that the principal inflationary threats are due to increased oil prices fueled by ongoing tensions in the Middle East and the likelihood of continued high interest rates set by the U.S. Federal Reserve.

Such conditions are expected to divert capital from emerging markets to more developed economies, potentially impacting exchange rates. "And we are in that category," Kganyago added, noting a more than 4% depreciation of the South African rand against the dollar since the beginning of the year.

While there have been concerns about food price inflation due to adverse weather conditions such as droughts across Africa, South Africa has not yet seen significant price surges from this sector in its most recent inflation data.

Amid these economic challenges, South Africa, Africa's most industrialized nation, is preparing for a crucial general election on May 29. This election could be historic if the ruling African National Congress loses its parliamentary majority for the first time since the end of apartheid three decades ago.

The upcoming election adds another layer of uncertainty, which Kganyago noted is a common trend globally with many countries conducting elections this year.

These election-related uncertainties are likely to manifest in various financial markets, including foreign exchange, bonds, and equities, adding to the economic challenges facing the nation.