long term. the bank of albania sticks to the opinion that the public finance consolidation should anchor to an effective and transparent fiscal rule. this rule would increase the short - term flexibility of public finances and reduce the fiscal adjustment cost. second, the overall economic and financial stability is a prerequisite for a rapid economic growth. the monetary policy has been and will remain oriented toward meeting our inflation target. in line with the cyclical situation, this policy has provided its stimulus through the key interest rate cut and ongoing liquidity injection into the banking system. we have also revised the banking system regulatory basis from the viewpoint of easing it, in order to stimulate lending by the banking system. i avail myself of the opportunity to reiterate that the banking system remains profitable, liquid and well - capitalised. safeguarding the stability of this system will always be on our focus. bis central bankers ’ speeches third, reducing uncertainties and risk premiums in the economy is an important priority. as i have already stated, these uncertainties stem, to a great extent, from the foreign market, but a part of them stems from the albanian economy. without intending to make a list, i will mention just a few : • reducing informality should be a primary objective. besides outflows in public finances, informality brings hidden costs in terms of diminishing competition, inefficiency in terms of lack of balance sheet transparency, and artificially increased financing costs to businesses. • fostering the financial system infrastructure protection is another aspect deserving attention. the bank of albania signed and has already made effective a cooperation agreement with the people ’ s bank of china, which also provides for the possibility to obtain liquidity in case of need. an important step in this regard is the agreement between the deposit insurance agency and the european bank for reconstruction and development to increase the deposit insurance coverage. we deem that there is room for other agreements with international financial institutions specialised in providing funds and assistance. establishing collective public protection releases the financial system and businesses from setting up individual protection. besides, it may be transformed into a necessary source of funds for the albanian economy. • improving the business climate further and observing the contract enforcement. the business climate is a rather complex issue, but i would highlight two issues here. first, the payment of deferred budget liabilities as a priority. in spite of the financial cost, it is an important step for easing the debt burden in the economy and signalling the political willingness to guarantee

##increasing importance in the assets structure of the banking system, constituting a considerable source of the demand for monetary assets. the credit / deposit ratio increases on a continuous basis, an indication that positively introduces the function of the intermediation role of the banking system in supporting the economic development. the balance credit rise marked during the eleven - month period of the year the value of lek 15. 3 billion, reflecting a rise of 30 percent relative to the yearend of 2003. the easing monetary policy of the bank of albania has helped smooth the appreciation pressure of the lek exchange rate. the differences between interest rates in foreign currency and those in domestic currency incurred a decline during 2004. however, the rising foreign currency inflows on one hand, and the reduction of imports volume on the other one, have created a temporary difference between the foreign currency supply and demand during the summer period. this misbalance has exerted a significant pressure on the appreciation of the lek exchange rate, fostering the foreign market volatility. the exchange rate volatility through this temporary rise of foreign currency supply has imposed the necessity of the bank of albania intermediation to the foreign market during the summer period, towards purchasing the foreign currency. though trade deficit increased, the current deficit in the third quarter has been lower than in the previous quarters, thanks to increased and positive balances of income, services, and particularly current transfers. the current transfers balance is estimated at usd 295 million, being higher than the 1 / 2 one of the first two quarters, and nearly 44 percent higher than the one of the third quarter of the previous year. overall, the balance of payments performance during 2004 was positive. the gross foreign reserve level, at the end of this period, was estimated at usd 1 billion and 244 million, adequate to cover 5. 1 months of imports of goods and services. based on the aforementioned developments, we may conclude that year 2004 contributed generally in further consolidating the country's macroeconomic equilibrium. although full data for the yearend of 2004 are not yet available, there is a crystallization of the idea that the primary targets projected in the medium - term plan on the country's development have been met satisfactorily. according to the latest estimations, the albanian economy grew by 6 percent under the conditions of a low inflation rate, far closer to the bottom level of the targeted band. the structural reforms, through their problematic concerns, have progressed during