would like to talk about how we might navigate them. given my brief, i am going to focus on south africa ’ s experience and outlook, although i think that this framework is useful for thinking through the broader emerging market challenges. macroeconomic rebalancing since the 2013 ‘ taper tantrum ’, south africa has undergone a substantial macroeconomic adjustment. in particular, the current account has narrowed from nearly 6 % of gross domestic product ( gdp ) in 2013 to 2. 4 % last year. this change came largely from the trade account, which has registered surpluses in 8 of the past 10 quarters. our services account has followed a similar trend, and is now roughly balanced. page 3 of 8 by contrast, our income and current transfers account has remained in deficit. this is in part because of transfers to our neighbours in the southern african customs union, amounting to roughly 1 % of gdp annually. the balance reflects income payments, driven by high yield differentials on our foreign liabilities when compared with our foreign assets. a growing stock of sovereign debt held by foreigners has been an especially important contributor to these income payments. the overall income deficit stands at about 3 % of gdp, of which close to 1. 5 percentage points is coming from interest payments on sovereign debt. the fiscal balance has changed less than the current account deficit, at least at a headline level. the latest medium term budget policy statement indicates a fiscal deficit of 4 % of gdp for the 2017 / 18 financial year. this is better than the 2012 / 13 figure of 5 %, but it is still large – both in absolute terms and relative to previous projections. the change in the primary balance has been more dramatic, narrowing from 2. 3 % of gdp in 2013 to 1 % in the latest financial year. but this number is still negative, so the debt stock is not yet stabilising. as a central bank governor, i try not to say too much about fiscal policy – not least because i would like to reciprocate the courtesy that other authorities show us by respecting the independence of monetary policy. let me therefore just reiterate three crucial points made by our minister of finance, mr tito mboweni, in his recent address to parliament. 2 to quote directly : we must choose a path that stabilises and reduces the national debt. we cannot continue to borrow at this rate. we must choose to reduce the structural deficit, especially the consistently high growth in the real public - sector wage

bank and will analyse developments in south africa and the rest of the world that could affect inflation. finally, the present institutional framework in south africa in the form of the south african reserve bank act, act no. 90 of 1989, provides the reserve bank with a great degree of autonomy in its operations. the reserve bank ’ s functional independence on monetary and related policies is clearly stated in sections 10 and 35 of the south african reserve bank act. section 35 empowers the board of the bank to make rules “ for the good government of the bank and the conduct of its business ”. in section 10 the powers and duties of the central bank are spelled out in great detail. most of the functions described in this section are the normal functions that one would expect a central bank to perform. in section 10 ( 2 ) it is also clearly stated that “ the rates at which the bank will discount or rediscount the various classes of bills, promissory notes and other securities, shall be determined and announced by the bank from time to time ”, clearly giving the bank the right to determine bank rate in an autonomous manner. the personal dependence of the reserve bank is determined by section 4 of the act indicating the conditions of appointment of the governor, three deputy governors and other board members of the reserve bank. this section clearly precludes any person actively involved in politics of becoming a board member of the bank. seven of the directors, including the governor and three deputy governors, are appointed by the state president, while the other seven are elected by the shareholders. by means of these appointments the government, of course, have an effective say in the policies of the bank. the governors are, however, after their appointment normally allowed to operate in an independent manner. the instrumental independence of the reserve bank is clearly spelled out in the act and the reserve bank is precluded in section 13 ( f ) of making excessive direct purchases of government stock. in this last - mentioned section it is stated that the bank may not “ hold in stocks of the government of the republic which have been acquired directly from the treasury by subscription to new issues, the conversion of existing issues or otherwise, a sum exceeding its paid - up capital and reserve fund plus one - third of its liabilities to the public in the republic ”. this section therefore restricts the direct financing of government deficits. the south african reserve bank is also financially independent from the government because of adequate financial resources and complete control over its own