In this context, it gives cause for concern that the fiscal stance in terms of the cyclically adjusted primary balance has eased over the past two years and appears likely to do so again this year. It is also possible to address the currency appreciation at its source by applying what some representatives of the tourism sector have appropriately referred to as “access restrictions and pricing”. In the recent past, numerous observers have expressed the opinion that the Central Bank’s key interest rate is too high under current conditions. As grounds for their arguments, they cite much lower interest rates in trading partner countries, the fact that inflation in Iceland has been at or below target for three years, and the Central Bank’s overforecast of inflation in recent years. Discussing whether the monetary stance is in line with the Bank’s objectives and current economic developments and prospects is normal and appropriate. Opinion varies, sometimes even within the Monetary Policy Committee itself, because reliable data on current and recent developments become available with a time lag and the future is always uncertain. 5  The Bank’s key nominal interest rate is now 5%, and the corresponding real rate is about 2½%. In view of the business cycle position and the fact that inflation is below target, this implies an equilibrium real rate of 1½%, which must be considered low, given that long-run growth potential is significantly higher. Current nominal and real interest rates are not high in historical terms, although they are high in current international context.

Through collaboration and strategic alliances between Malaysian Islamic fund management companies and the participation banks in Turkey, the development and distribution of Shariah compliant funds across borders could be made possible and new investment options to divest the savings of retail clients, as well as in the  BIS central bankers’ speeches  3  development of investment strategies to meet the needs of high net-worth individuals or sovereign funds. Fourthly, partnership in innovation – where the Malaysian and Turkish financial community could jointly develop innovative products and investment instruments, provide consultation and advisory services on complex legal, accounting, tax and Shariah matters as well as developing human talent to support the development of Islamic finance. Joint Shariah research could also be conducted with International Shariah Research Academy, dedicated research in applied Islamic finance based in Kuala Lumpur. And finally, on the education and research front, possible collaboration can be explored between the International Centre of Education in Islamic Finance or INCEIF and Turkish universities to give opportunities for Turkish students to enrol in professional and postgraduate programs. Students from Turkey intending to deepen their knowledge in Islamic financial industry are encouraged to consider learning opportunities offered by Malaysia including possible attachments with Malaysian financial institutions. As I speak, efforts to develop human capital are already taking place now, as a team from the Malaysian financial community led by the Central Bank of Malaysia is conducting a capacity programme on Islamic finance in Ankara. This programme is held in collaboration with the Islamic Development Bank.