Johannesburg - Nobel Prize winning economist Joseph Stiglitz has warned South Africa that economic policies like rigid inflation targeting should be a secondary concern amid the worst economic crisis since the Second World War.

Speaking on the global financial meltdown at the University of Witwatersrand on Wednesday, the well-known economist said South Africa's inflation targeting mechanism was "a very indirect way of getting to the economy's underlying problems".

"I'm very strongly opposed to rigid inflation targeting," said Stiglitz, a professor at Columbia University in New York, who was awarded the Nobel Prize for economics in 2001. "The financial crisis is in part as a result of central banks focusing on inflation. You have to balance it with other concerns."

"It's not that I don't care about inflation, but you need policies that will do something about the current economic situation," he said.

The South African Reserve Bank (SARB) shocked the market last month when it announced that it would not cut interest rates, in an attempt to achieve its inflation target of between 3% and 6%. The key repo rate - the rate at which the central banks lends to its commercial counterparts - is currently 7.5%.

Stiglitz said he favoured a world economic order in which developed nations effectively subsidised developing nations by dropping surcharges and tariffs on their exports.

- Fin24.com