a contribution to the discussion on our mandate. so let us talk about the sarb ’ s mandate. the constitution, in section 224, instructs the sarb to protect the value of the currency in the interest of balanced and sustainable growth. this mandate reflects an understanding that protecting the value of the currency is a critical foundation for achieving lasting growth. clearly, the mothers and fathers of our constitution did not want us to let inflation run. we might have got more growth but it would have been unsustainable. as many countries have discovered, after a temporary boom, we would end up in stagflation, with weak growth and high inflation. the framers of our constitution also cared about macroeconomic imbalances, which might, for example, result from a debt boom, or if we spend well in excess of what we produce, with imports running too far ahead of exports. the constitution tells us what to do, but it is not explicit about how we do it. we had to figure out a monetary policy framework for ourselves. in fact, it took us a few years to arrive at the approach we use now : the constitution was passed in 1996, but we only started inflation targeting in 2000 – after a false start using the so - called ‘ eclectic approach ’ that included a failed attempt to control the exchange rate. economics. retrieved from the sarb : http : / / www. resbank. co. za / lists / speeches / attachments / 550 / principled % 20agents % 20reflections % 20 on % 20central % 20bank % 20independence. pdf. for a scholarly treatment : tucker, p. 2018. unelected power : the quest for legitimacy in central banking and the regulatory state. princeton university press. page 4 of 14 the inflation target, agreed between the sarb and national treasury, was initially set at 3 - 6 % before being shifted to 3 - 5 %. the emerging market crisis of 2001 led to the reinstatement of the 3 - - 6 % target, and it has remained since then. more importantly, the target created a clearer framework for decision making and enhanced public understanding of the sarb ’ s monetary policy objectives. but this choice of target also left important questions open. in particular, because the 3 - 6 % we ended up using is a wide range, it created uncertainty about the sarb ’ s true objective. i recall that a consultant helped us with some

t t mboweni : an overview of the economic challenges of 2006 address by mr t t mboweni, governor of the south african reserve bank, at the annual dinner in honour of the ambassadors and high commissioners accredited to the republic of south africa, pretoria, 30 november 2006. * * * your excellency, the dean of the diplomatic corps your excellencies, ambassadors and high commissioners your excellency, the chief of state protocol your excellencies, heads of international organisations represented in the republic of south africa deputy governors of the south african reserve bank senior officers of the south african national defence force senior management of the south african reserve bank and their spouses / partners editors and other media representatives ladies and gentlemen 1. introduction it is an honour to welcome you once again to the south african reserve bank for what has become an annual event on our calendar. every year i am humbled by the turnout, and this year is no exception. this past year has been an extremely challenging one from a monetary policy perspective. some of the challenges have emanated domestically, but external economic and geopolitical events have also provided challenges to us as well as to many other central banks around the world. this evening i will give a brief broad - brush review of some of these developments. further details can be found in our publications, including our quarterly bulletin which will be released next week. i am aware that one of the issues that is close to your hearts in the diplomatic community is the behaviour of the exchange rate of the rand as your purchasing power in this country varies inversely with the fortunes of the rand. i have noticed that many of you are looking a lot happier tonight than you were this time last year! 2. the external environment the recent world economic outlook published by the international monetary fund ( imf ) characterised the global economic environment as robust, with economic activity exceeding expectations. while the global expansion has in general been broad based, the improved growth performance of developing and emerging economies compared to that of developed economies has been most noteworthy. this improvement has taken place across all regions, including sub - saharan africa. as a group, developing countries now account for more than half of total world gross domestic product ( gdp ) in purchasingpower parity terms. this past year has been overshadowed by a high degree of volatility in the international oil markets, which posed a risk to the outlook for world growth and inflation. during the course of the year, the price of brent crude oil reached