that is why the bank of mauritius re - oriented its policy stance and brought about reductions in the rate of interest during the last two years. the successive reductions in the rate of interest helped alleviate the financial burden of enterprises in the export processing zone ( epz ). to what extent monetary policy can go on accommodating the interests of the various economic sectors without compromising the very mandate of the bank of mauritius is clear to the enlightened observers. there are limits to what monetary policy of the bank can deliver. the problems of the epz are mostly management and market - related. the emerging problem of our sugar industry is also market - related. the problems are definitively not rooted in the exchange rate of the rupee. it is inappropriate to speculate that a deliberate step to cause the rupee to depreciate is in the policy agenda of the bank of mauritius. this perception is incorrect. world price of oil has attained unprecedented levels. it will evidently impact on the domestic price level. a depreciation of the rupee, triggered by oral stimulus, would exacerbate inflationary pressures in the economy. ladies and gentlemen, having said that let me reiterate my support to the board of directors and the management of the ioib for the efforts they have been putting in so far to steer the bank out of troubles. i wish them the very best of success. thank you.

consideration for monetary policy in that it affects the demand situation in the economy. an illustration of this is provided, for example, by the recent years ’ changes in household disposable income. although household wage income rose strongly from 1994 to 1997, the sector ’ s disposable income hardly changed. household income has been held back by increased taxes and decreased transfers ; but for the negative effects of changes in public systems, the annual level of household income would have been 3 to 4 per cent higher. the burden on household income was probably greatest in 1996 but even in the coming two years the fiscal stance measured in this way will be tight. it is accordingly helping to lower inflationary pressure. if, in the current situation with good prospects for growth, unexpected budget improvements were to be used to give fiscal policy a more expansionary turn, the result might be an earlier need to tighten monetary policy in order to secure the objective of price stability. it is then by no means certain that the overall effect on demand would be what was intended. secondly, the fiscal trend in a longer context of “ sustainability ” is also important for monetary policy. if the government deficit appears to be growing uncontrollably, as was the case for some years in the early 1990s, uncertainty may arise as to whether the problems can be tackled at all. this can have negative consequences for monetary policy ; the exchange rate may weaken sharply, for instance, with an increased risk of inflation. the budget consolidation has naturally been important in this respect, too. it is the main single explanation for the krona ’ s appreciation since the crisis years, as well as for the riksbank being in a position to lower interest rates so markedly. as a result of the years with massive general government deficits, however, from 1990 to 1996 public sector debt has grown from 44 per cent of gdp to 78 per cent. this restricts the future freedom of action in economic policy and means that there is a risk of fiscal policy in practice having a destabilising effect. this is particularly the case in that, with high revenue and spending ratios, the swedish budget is sensitive to cyclical factors. seen from this angle the government ’ s target of a 2 per cent budget surplus over the economic cycle appears reasonable, though there is no academic foundation for a quantified level of ambition. there may be grounds for strategic tax cuts to improve the long - term growth potential. but in the light of the experience with government