To promote global financial stability in the Islamic financial system, the Taskforce on "Islamic Finance and Global Financial Stability" was established in 2008 by the IDB in collaboration with the IFSB, together with the participation of industry leaders and international experts to examine the development of further building blocks in Islamic financial infrastructure to strengthen its resilience and ability to meet future challenges. Substantive progress has been achieved by the Taskforce and a report including major recommendations is planned for submission to the IFSB Council in November this year. Among the areas covered by the report include the effective implementation and enforcement of the prudential standards, the supervisory framework, the strengthening of the financial safety net mechanisms and the development of an effective crisis management and resolution framework. Among the recommendations in the report will be the establishment of a Financial Stability Forum to address issues of financial stability in the Islamic financial system. The internationalization of Islamic finance requires the industry to progress into the next stage of international acceptance, with mutual recognition of financial standards and products across jurisdictions. Indeed in the area of Shariah, there has already been progressive convergence of Shariah views and rulings, and the mutual recognition of financial standards and products across jurisdictions. As this continues to occur, it would be a major driver towards greater convergence and harmonization. This has been facilitated through greater engagement among the regulators, practitioners and scholars in Islamic finance across jurisdictions. This interface is important given the common interest of global financial stability.

A budget surplus over the business cycle can contribute to a speedier reduction of government debt, which is currently high. This will create greater freedom of action for future economic policy, which is particularly important in that Sweden’s public finances are no doubt still relatively sensitive to the cyclical economic situation. But the future has further challenges in store for fiscal policy. An ageing population implies new and growing requirements, for example. Another matter that may alter the conditions for fiscal policy is the increased mobility of tax bases, which in some respects may make it difficult to maintain present levels of taxation. Better wage settlements but what about the next round? BIS Review 47/1998  -3As things now stand, fiscal policy will continue to provide good room to manoeuvre in monetary policy in the coming years. So what about the contributions from the labour market and wage formation? Of the aggregate value-added in the Swedish economy, wages make up almost 70 per cent. Wage trends are therefore crucial for the path of inflation. For many years, the wage rise in Sweden has been above the rate in most other countries in Europe. But as we all know, instead of this giving Swedish employees a better real wage, the outcome has been the reverse. In the 1990s the rate of wage increases in Sweden has been curbed but the negotiated increases in the 1995 round were above the European average. As I mentioned earlier, economic policy in Sweden has been focused on low inflation since 1991.