here that there is a separation of debt management from monetary management. government securities are issued only for purposes of financing the government ’ s borrowing requirement whereas bank of mauritius bills are issued for purposes of monetary management. the policy of issuing central bank bills to mop up any excess liquidity thrown up by incoming foreign exchange flows has a direct relevance to the main theme of this talk. faced as it is today with the triple shocks stemming from the erosion of trade preferences in the sugar and textile sectors and the surge in oil prices on the international market, mauritius has no choice but to embark on bold structural reforms. this is precisely what we are doing. efforts at fiscal consolidation with a view to maintaining medium - term fiscal sustainability, the achievement of a stable macroeconomic environment and the maintenance of social consensus are some of the key ingredients for ensuring the success of these economic reforms. the achievement of higher job - creating growth remains a central policy challenge for mauritius now and in the years ahead. to make any significant dent in the unemployment rate, standing at around 8. 8 per cent, mauritius needs to move to a higher growth path of at least 7 to 8 per cent per annum. in developing new growth poles, we must take care to consolidate the existing pillars of the economy, a consideration not without implications for the conduct of monetary policy. the erosion of trade preferences for its main exports, coupled with the challenges stemming from globalization, make it imperative for mauritius to raise productivity and become globally competitive. as the country shifts progressively toward a service - dominated and knowledge - based economy, labour - market flexibility has become vital. the central wage - setting framework that characterized the labour market since before independence allowed for little wage moderation, did not favour wage differentiation across sectors and enterprises, and focused more on job preservation than on job creation. the recent establishment of the national pay council, which aims at broadening practices in wage agreements to reflect better sector - and firm - specific conditions, represents a breakthrough in labour market reform. it will enable us to link wage growth to productivity gains. this, together with the implementation of the proposed changes in labour regulations, will give the much needed flexibility in the labour market. as regards the external accounts, the deficit on the current account represented 8. 1 per cent in fy 2006 - 07, compared to 5. 2 per cent of gdp in fy 2005 - 06. this deterioration reflected mostly the worsening merchandise account deficit which was itself due largely to the purchase of two aircraft. this was

considered quite robust, viewed against the backdrop of the gradual recovery of the global economy from the economic crisis and the sorry state of banking and finance in major economies. – we did not relent in strengthening our regulatory and supervisory framework. we enhanced existing guidelines, e. g. on liquidity risk management, released new guidelines on country risk management, and finalised work on guidelines relating to fair valuation of financial instruments. all three pillars of the basel ii capital adequacy framework have now been put in place with the issue of the guideline on the supervisory review process. – we admitted new players in the banking sector and, in my next statement, i hope to report on our new full - fledged sharia - compliant banks as they start operations later this year. – preliminary work on the setting up a deposit insurance scheme in mauritius was initiated in consultation with the banks. i hope to elaborate further on progress in this area in our next report. – savings mobilization continues to be an area where i feel that more effort is needed. we will relentlessly pursue efforts to improve the savings rate, to induce our citizens to save for the proverbial rainy day and to reduce our dependence on external financing. monetary policy – at the core of the central bank, our monetary policy committee ( mpc ) helped us to fulfill our mission of maintaining price stability. – in the light of the conditions prevailing during fy 09 / 10, the mpc, which had reduced the key repo rate by 100 basis points in march 2009, considered it more appropriate to leave it unchanged at 5. 75 per cent all through the five meetings convened from june 2009 to june 2010. – i am happy to record that our monetary policy stance succeeded in maintaining price stability. the headline inflation rate which stood at 6. 1 per cent in july 2009 declined steadily to 1. 7 per cent in june 2010, which was low by historical standards. – i take the opportunity here to express my appreciation to our two foreign members, prof stefan gerlach and mario blejer, whose extensive experience have greatly benefited the debate and enhanced the decision - making process at mpc meetings during these trying moments. exchange rate developments – we can proudly say that we have been successful in maintaining monetary and financial stability in spite of uncertain and unusually volatile conditions. – despite sustained criticism from certain quarters, we remained steadfast in our duty to conduct exchange rate policy in the wider national interest. we felt vindicated when the imf validated