extent the stronger peso. headline inflation has fallen to 7. 0 percent in the second half of 2005. the average inflation rate for last year was 7. 6 percent. more importantly, core inflation, which takes out the impact of volatile food and energy prices on the cpi, has steadily trended downwards. the decline in core inflation suggests that the inflationary pressures of the past year were not of a permanent, demand - driven nature. this fact supports the limited and selectively tightening bias of monetary policy. another source of optimism is the improving fiscal performance. coming from a very difficult period of large and persistent fiscal overhang, the government embarked on and succeeded in its initial efforts towards fiscal consolidation, by way of intensified tax administration and vital new tax measures as well as expenditure control. the national government budget deficit stood at p146. 5 billion for 2005, well below the target for the period. this figure also represents the lowest budget shortfall since 2001. as revenue gains continue with the vat implementation, we stand a good chance of seeing a balanced budget by 2008. the positive investor sentiment over the progress made on the fiscal front as well as healthy inflows from remittances have also strengthened the external position. latest estimates show that the overall balance of payments ( bop ) position for 2005 stood at a surplus of us $ 2. 4 billion, which is a welcome turnaround from the previous year ’ s shortfall. the peso likewise ended stronger against the us dollar on the back of the positive market sentiment and strong inflows. the peso ended 2005 as the top performing currency in the asian region. this surge in dollar inflows also allowed the bsp to build up its dollar reserves. at us $ 18. 5 billion as at end - december 2005, the country ’ s gross international reserves ( gir ) is significantly higher than the us $ 17 billion target for the year and is sufficient to cover about 4 months ’ worth of imports of goods and services. meanwhile, the country ’ s external debt also narrowed to us $ 55. 5 billion by end - september 2005. this amount continued to be made up mostly of medium - and long - term liabilities, which ensures that our debt payments remain manageable and sustainable. at the same time, the philippine banking system continued to show improving soundness. as of november 2005, commercial banks ’ non - performing loans as a percentage to total loans registered a single digit level of 8. 7 percent.

understanding how – in light of evolving financial vulnerabilities – funds may collectively respond to different adverse shocks. and, in turn, how such behaviour could affect the functioning of core global markets in times of stress. this can only be achieved through close collaboration, both across borders and across authorities. and it is necessary if we are to mitigate system - wide vulnerabilities effectively ex ante. which brings me to my last point, before we finish up. delivering a macroprudential perspective in the oversight of the funds sector will not happen overnight. it took over a decade to develop that framework for the banking sector. and that was from a starting point of decades of microprudential regulation. 4 / 5 bis - central bankers'speeches still, it is important that we make progress and – where we do identify systemic vulnerabilities – we have the courage to act, before shocks hit. because ultimately the costs of inaction can be large, both for investors and the broader economy. this has been, and will remain, a priority for the central bank of ireland in the years ahead, working with colleagues internationally and domestically. so let me finish off here. thank you again for joining us today. have a good evening and a safe return home to those travelling back. 1 see fsb ( 2023 )'revised policy recommendations to address structural vulnerabilities from liquidity mismatch in open - ended funds'at : https : / / www. fsb. org / wp - content / uploads / p201223 - 1. pdf. 2 see central bank of ireland ( 2022 )'the central bank's macroprudential policy framework for irish property funds ', available at : https : / / www. centralbank. ie / docs / defaultsource / financial - system / financial - stability / macroprudential - policy / nbfi / macroprudentialmeasures - for - irish - property - funds. pdf ; and central bank of ireland ( 2024 ),'the central bank's macroprudential policy framework for irish - authorised gbp - denominated ldi funds ', available at : https : / / www. centralbank. ie / docs / default - source / publications / consultation - papers / cp157 / macroprudential - framework - for - irish - authorised - gbp - ldifunds. pdf? sf