are resilient and therefore less vulnerable to domestic and external uncertainties. ii. the challenges to monetary policy formulation on the part of the bsp, we formulate monetary policy against an assessment of global and domestic economic issues and developments. we are mindful of the range of circumstances in recent times which draws important challenges for philippine monetary policy. plentiful global liquidity. the strong foreign exchange inflows into asia. the build - up of international reserves. the marked appreciation of regional currencies against the us dollar. financial innovations. yield - seeking activities of agents, and now more recently, a reassessment of risk appetite and repricing of risks. a possible further tightening of global credit conditions. the fragility of us growth. volatile oil and commodity prices. all these challenge us as we endeavor to provide a sound monetary policy environment, while advancing reforms that promote growth and respond to changes in global financial conditions. our resolve to follow good governance and international best practices in our reform agenda has provided us the discipline necessary to craft appropriate responses and avoid steps that could distort rational market behavior. iii. the courses of action let me put forward three essentials in response to these challenges. one, we will remain focused on achieving our inflation target. our monetary policy will continue to be responsive and forward - looking. our inflation targeting approach has proven to be effective as a monetary anchor and provides us with an array of policy tools against turbulent economic and financial conditions. two, we will maintain our market - determined exchange rate policy, while complementing this with a liberalization of our foreign exchange regulations to allow greater access to foreign exchange for outward investments. we have already put out the “ first wave ” of fx liberalization measures, a “ second wave ” will be implemented before the end of the year. third, we will continue to undertake steps to strengthen the domestic financial system and help manage risks attendant to financial market developments. in the banking sector, we are focused on good governance, asset - clean up, capital build - up and industry consolidation. we want to see stronger, well - governed, better - capitalized banks that would be effective channels of monetary policy. in other words, stable financial institutions that perform the intermediation function between the sources and users of funds, fully cognizant of the risks attendant to this role. as driven by the changing profit dynamics brought about by our adoption of international accounting and the basel ii capital adequacy standards

for short - term economic gains. as global experiences overwhelmingly show, the price that we will ultimately pay will be extremely painful. we can grow sustainably if we let growth be export - driven. i have suggested that we embark on a national export drive. like what the tourism industry has done, we can set targets for our traditional exports and even new exports. we can then mobilise the necessary resources and efforts to reach those targets. this cannot be the drive of government only. to be successful, it has to be a collective drive of the government, the private sector, industry organisations and even trade unions. we in the reserve bank are examining several ways that we could help promote exports. first, the forward exchange cover is still available for imports associated with exports, not only of goods, but also services. second, we are re - assessing the credit export facility that we offer through the commercial banks to see if it can be more attractive to small exporters. third, we are studying the provisioning of export credit guarantee with the help of the adb. lastly, we intend to convene a conference of interested groups on exports in the new year following on from our successful inaugural symposium two months ago. there are some emerging areas of exports that we need to harness. anaconda 2, shot in fiji and released recently, is, i hope, a leading wedge of what fiji can offer in the audio - visual industry. i believe that there is potential for growth in the information and technology industry. we have seen an increase in back - office services. we are fortunate to have invested in the southern cross submarine cable, which offers more than enough capacity to cater for the growth in the it related initiatives. before leaving this issue, i just want to emphasise the important role of fiscal policy in creating the enabling environment for growth and stability. fiscal policy has a greater and faster impact on the economy, and the role of government in promoting sustainable economic development is extremely vital. government has reduced the fiscal deficit to 3. 5 percent of gdp this year and further reduction is planned in the medium term. such a fiscal stance will strongly support the long - term sustainability of the economy and keep debt at a moderate level. raising the level of growth maintaining macroeconomic stability does not necessarily mean that we should be contented with lower levels of growth. we can and we must raise the long - term potential growth rate of the economy while maintaining stability. the only way to raise the potential of the