several members of our region – attest to the capacity for policymakers to respond in a pragmatic and timely rather than strictly rules - based and sequential manner. 6. in this connection, the fund ’ s framework for managing inflows should serve only as an empirical study on country experiences in using capital flow management measures. it should not become an obligation for member countries as was the case with the 2007 decision on exchange rate surveillance ; otherwise the fund will risk straining its relations with the membership. we also note that the above framework is part of a broader reform agenda on capital flows, which would entail examining both push and pull factors, as well as both source and recipient dimensions of flows. moreover, the longer - term solution to managing capital inflows lies in developing deeper and broader financial markets, which would enhance absorptive capacity and facilitate efficient use of capital. we therefore call on the fund to further study this aspect to help members develop their capital markets. 7. we thank the fund for its analytical work on assessing reserve adequacy, but we would like to stress that reserve holdings are not an economic policy goal, nor are they driven primarily by precautionary self - insurance motives, but are the outcome of a larger policy strategy for macroeconomic and financial stability. thus, we view that the fund ’ s emphasis on assessing reserve adequacy might be misplaced and would add little value to policy dialogue in the fund ’ s surveillance process, the focus of which should be on the broader macro - policy mix in relation to economic policy objectives. moreover, assessing reserve adequacy remains an inexact science, with theoretical underpinnings yet to be concretely established. the fund ’ s recent exercise may therefore be best viewed as an addition to ongoing research on this issue, which would help clarify expectations about what the new metric can and cannot achieve. 8. the fund cannot hope to establish confidence in the ims without building adequate financial safety nets to ensure the necessary backstops in the event of global systemic crises. we therefore call on the fund to strengthen its financing toolkit, including the possible inclusion of a short - term liquidity line, taking into account reinforcing relationships with fund facilities and other regional financing arrangements. 9. over the long term, the eventual choice of a global reserve currency, or currencies, needs to reflect evolving international trade and investment flows and be widely accepted by the market. in this regard, we see

with the united kingdom and other members of the then sterling area, as part of the emergency finance regulations applied by that group of countries. the original objective was to retain a free movement of funds between these countries whilst preventing “ hard currency ” funds from flowing out of the area to non - sterling countries. whilst the sterling area exchange controls were removed gradually after the end of the second world war, liberalisation of controls in south africa was halted by the declaration of a state of emergency in march 1960, and the imposition by the authorities in may and june 1961 of comprehensive measures which were intended to strengthen both the current and the capital accounts of the balance of payments. as roger gidlow ( 1995 : 181 et seq ) states then, stricter import controls included restrictions on inheritance, gift and maintenance transfers as well as allowances for tourists and emigrants. even more significant, capital transfers abroad by residents were disallowed while residents were called upon to declare their foreign assets and liabilities. furthermore, the transfer of profits earned by foreign controlled companies prior to 31 december 1959 was prohibited. reviewing developments from the vantage point of 1996, the governor of the south african reserve bank ( sarb ) wrote as follows ( stals, 1996 - 06 - 17 ) : the initial non - economic factors that led to the outflows of capital from south africa during the more than thirty years, from 1961 until the early 1990 ’ s rapidly disappeared after the announcement of the election of the government of national unity towards the end of 1993. although a large amount of funds still flowed out of the country during the first half of 1994, the situation changed dramatically thereafter. in the second half of 1994, there was a net inflow of more than r9 billion into the country, and during the calendar year 1995 a further net inflow of r21, 7 billion, to bring the total net inflow for the 18 months from july 1994 to december 1995 to more than r30 billion. in april 1994, when the government of national unity took office, the reserve bank held about r7 billion in foreign reserves, but also had about r6 billion outstanding in short - term borrowings. during the years which ensued, the sarb followed a policy of trying to stabilise the exchange rate of the rand by intervening in the domestic foreign exchange market, this being consistent with the provisions of the interim constitution of the republic of south africa which required the bank to protect the internal and external value of the currency.