to foreign exchange to support more outlets for savings and investments that expand the country ’ s longer - range capacity to earn foreign currency. the other instances that drive expansion in the currency base are purchases of foreign exchange from public and private sector activities. these produce a one to one growth in the reserves and create no tension in the external reserve backing for the domestic currency. liquidity is also created when the private sector takes in more foreign exchange than it uses. such excesses flow from commercial banks to the central bank. in the process, the central bank issues new domestic currency liabilities. this is liquidity that can support demand and credit growth without unease about the cover for exchange rate stability. linkages with tourism, provide competitive substitutes for imports and expand our export reach. the central bank ’ s targeted liberalisation of capital controls, has also allowed such categories of enterprises direct access to financing in foreign exchange. we believe that it is a strategy that will bear fruit over the medium - term. second, the fiscal policy framework has to bolster support for the currency. deficits, when they arise, should anchor public investments with positive net returns to economic growth, and have a positive foreign exchange bias. more fundamentally, for our present circumstances, deficit reduction and eventually budget surpluses should become the order, with more public investments sustained from savings on recurrent expenditures. fiscal deficits and debt accumulation, can make it difficult to wean the government off borrowing from the monetary authority ; and in parallel, can expand foreign currency debt in ways that cannot be easily repaid. better foreign exchange retention and confidence engendered by fiscal policy, takes us to the topic of exchange controls. some rebranding is necessary to make this more of a conversation about capital controls and capital flow management. this is essentially where our policies are more binding, but where scope for very gradual targeted easing is possible over the medium - term. the limit though is to understand that liberalisation cannot happen out of a sequence of first having in place lasting policy and accountability frameworks that bolster investor confidence. where these frameworks are missing or nascent, liberalisation must impose a distinction between how we deal with direct investments versus very liquid, and highly sensitive portfolio flows. if the end goal is to have fully liberalised capital flows, then we must accept that it would come with a floating bahamian dollar. if we float, we should want to avoid the exchange rate volatility that arises when investors become jittery. if we

dollarise to eliminate currency volatility concerns, then fiscal and private sector savings will remain important to provide the buffers needed to make our economy resilient. dollarisation will not provide a shortcut out of reforms that are needed - - in terms of utilising less direct means of influencing credit and investment behaviour to safeguard financial stability ; having more comprehensive realtime data on economic activity, including fiscal indicators ; having a larger stock of foreign reserves to cushion against shocks, and the like. dollarisation would still be premised on a target value for the exchange rate at the time of the domestic currency ’ s abandonment. this again raises the question of whether such an outcome could be achieved absent an effective capital flow management regime. there is much more than can be said on this topic and on other dimensions of the central bank ’ s role, beyond the protection of the currency. the bank has been working tirelessly in all of those dimensions : strengthening the quality of our regime for supervised financial institutions ; accelerating the modernisation of the domestic payments system ; laying foundations for use of more indirect monetary policy instruments and building more capacity for macro - prudential supervision. we realise that it is only through lasting structural reforms that there would be progress in making the monetary and financial system a stable, more resilient and a less procyclical component of our growth and development. it is fitting therefore to have this esteemed panel assembled, and i look forward to hearing their views on this important topic.