##s were taken on by the central bank due to the experiences of poor supervision and regulatory oversight leading to mismanagement of these industries. these are the superannuation ( general provisions ) act and life insurance act. the new central banking act and bank and financial institutions act have enabled the central bank to undertake major initiatives in the financial sector. these included preparing the then pngbc for privatization, dealing with fast - money schemes, and enforcement actions against non - compliant institutions such as the workers mutual insurance ( png ) limited. we have introduced a number of new prudential standards for banks and supported the microfinance industry. we continue to work closely with all these financial institutions to ensure our people receive a safe and reliable financial service. 3. recent economic developments let me now briefly discuss the positive economic developments we have experienced since 2002. png is currently enjoying the most favorable and stable macroeconomic climate since gaining independence in 1975. throughout 2006, png continued to experience improved economic activity with increased confidence by the business community in the government ’ s macroeconomic management. strong economic performance is reflected by the major macroeconomic indicators, which include rising employment levels, increased exports, higher credit growth from the banking system, and prudent fiscal management. these developments have enabled us at the bank of png to maintain a neutral monetary policy stance, which has laid the foundation for economic growth. we have achieved and maintain low inflation, a stable exchange rate and low interest rates. these achievements are consistent with the bank of png ’ s objective of achieving and maintaining price stability. our foreign reserves reached a historical level of us $ 1497. 5 million ( equal to approx. k4. 5 billion ) on 10 november 2006 and is still around this level today. the west new britain province is a significant provider of non - mineral foreign exchange reserves, through the exports of palm oil, cocoa and forestry, combined with tourism. between 2000 and 2003, the province exported on average k256 million or 18 percent of total log exports and k1, 408 million or 62 percent of total palm oil exports from png. the government presented its 2007 national budget last week, continuing the prudent fiscal stance it has adopted and in line with the medium term development strategy. with windfall tax revenue from the high international commodity prices, and improved economic activity, the government plans to increase its development expenditure and reduce public debt. the imf has just completed its annual article iv mission to png

and is very pleased with our progress to date. the world bank has also expressed similar views on our economic management. given the favorable macroeconomic conditions, the challenge for all of us is how we can sustain these gains over the long term. i therefore encourage you all to continue to engage in various economic activities and agriculture production, and urged you to utilize the various financial services provided only by licensed financial institutions, such as the commercial banks. 4. recent developments in the financial sector turning to the financial sector, as at the end of september 2006, our financial sector comprises of four commercial banks, eleven licensed financial institutions ( lfis ), twenty - two savings & loan societies, two micro banks ( one of which is a pilot project ) seven superannuation funds, two investment managers, five fund administrators, five life insurance companies and two life insurance brokers. total assets of the financial sector, as at the end of september 2006 was k10. 5 billion. the commercial banks holds 65. 5 percent of total assets of the system followed by asfs with 25. 5 percent. licensed financial institutions and savings & loan societies hold 7. 3 percent each and life insurance companies ’ accounts for 1. 7 percent. total deposits and loans of the deposit - taking institutions were k6. 2 billion and k2. 6 billion, respectively and are mostly with commercial banks. our financial system is sound and healthy and it is the role of the licensed financial institutions to support business financing propositions to enhance economic activity. the biggest challenge for the banking industry is how to provide banking services to the rural communities where such services are nonexistent. 5. postal service network and district treasury rollout program one of the government ’ s medium term development strategies for delivery of banking and financial services to our rural areas is through its district treasury rollout program. this is in view of lack of development in the rural areas. another positive development is the provision of banking services via the postal service network. this is done in partnership with post png and the commercial banks including anz bank. this is a welcome development in png and we should embrace such development because it is bringing financial services to our rural communities. 6. development of the microfinance sector i earlier mentioned microfinance. this is another category of financial institutions that can impact positively on the lives of our people, especially in the rural areas with the provision of micro - financial services. we have heard of the many success stories in other developing