and ; 2 ) on movements in economic prices, e. g., exchange and interest rates : as the response of the us and other major central banks to the expected global economic slowdown unfolds. the latter could result in further risk aversion against emerging markets, including the philippines. the second challenge emanates from continued strong capital inflows to the country as a result of an important pull factor : the philippines ’ favorable macroeconomic performance. you may have heard me refer to this as the problem of plenty. i would like to emphasize that while these inflows provide an opportunity to boost long - term growth, they also pose substantial short - term macroeconomic challenges. it is the lag between the inflow of foreign exchange and corresponding domestic liquidity infusion and its eventual utilization that is critical. how that lag is managed could spell the difference between an inflationary situation and a manageable one. a further challenge is finding the appropriate mix of measures so this liquidity is channeled to more productive investments, particularly into infrastructure. lastly, the high and volatile international prices of oil, particularly if they remain high for a protracted period of time, continue to be a challenge. given the headwinds in the global arena, the challenge for policymakers is to craft sound macroeconomic policies that will further strengthen the domestic economy. on the part of the bsp, our policy thrusts in 2008 are to maintain a stable macroeconomic environment that is supportive of a growing economy, and to build a more resilient financial system that is flexible in the face of growing global competition and innovation. managing risks to inflation and inflation expectations remains a key policy priority of the bsp. on the external front, our policies will be geared toward : ( 1 ) ensuring sustainability of the country ’ s external debt ; ( 2 ) maintaining an essentially market - determined exchange rate with scope for occasional official action to smoothen sharp movements in the rate ; ( 3 ) maintaining a comfortable level of reserves ; and ( 4 ) further improving the foreign exchange environment through fx deregulation. reforms in the financial sector will be geared toward maintaining a strong banking system and a vibrant capital market. the bsp remains committed to strengthening the banking system through continued structural reforms and speedier disposition of non - performing assets. the asset clean - up of banks should help spur credit and investments, and contribute in providing the basis for more sustainable economic activity in the medium term. to further develop the domestic capital market

and expertise of the islamic financial services board, of which the bsp is an associate member, other international organizations and friendly governments which have signified interest in supporting bsp in this initiative, as well as from the rich experiences of outstanding practitioners of islamic banking. to achieve all these objectives, the bsp intends to work towards attaining a suitable legal framework for islamic banking in the philippines. we are currently in the very early stages of drafting a general law for the creation and regulation of islamic banks. consistent with this, we have included in our list of proposed amendments to our charter, a provision that will enable the bsp to develop regulations for the extension of financial facilities to islamic banks. concluding thoughts ladies and gentlemen, there is much work for all of us to do. the task requires strong partnerships among key stakeholders in the government and the private sector and the support of key international organizations and friendly governments. today ’ s workshop is another important step for all of us to work together, share ideas and mobilize support toward promoting islamic banking and finance in the country. indeed, a well - crafted framework for an islamic banking and finance system would ensure that our goal of stretching the coverage of our financial system [ so it casts a wider net ] is attained. in addition, islamic finance with the vast opportunities it offers could potentially trigger inflows of foreign investments. investments, which in turn, could be deployed towards building the necessary infrastructure and other projects to accelerate and sustain economic growth. for certain, an appropriate islamic banking and finance framework would help ensure that the philippines ’ financial system would truly be a more effective catalyst of broad - based and inclusive growth. on that note, let me wish you a most productive workshop. thank you and good morning. bis central bankers ’ speeches