interest rates and government bond yields. the capital outflow was only halted, and devaluation fears allayed when the imf announced in december 2000 an additional us $ 7 billion to alleviate the balance of payment difficulties stemming from the recent crisis. interest rates declined and there was a modest rise in capital flows in january 2001. in february 2001, a second financial crisis was triggered by a political dispute between prime minister bulent ecevit and president ahmet necdet sezer. the dispute raised concern that the country ’ s threeparty coalition government might collapse and raised doubts about the authorities ’ commitment to reform. market confidence in the system was shattered and the turkish lira faced a fresh major attack in february 2001. the central bank spent us $ 4. 5 billion, one sixth of its reserves, to defend the lira. these attempts, however, failed to restore confidence and the turkish authorities decided on 22 february 2001 to allow the lira to float freely. turkey ’ s economic programme was again strengthened following the crisis that led to the floating of the lira. the new economic framework included increased transparency, accountability and good governance in both the private and public sectors. the improved programme aimed to strengthen the primary fiscal position of the public sector, reduce the government ’ s immediate borrowing requirement and address major bank restructuring. market sentiment, however, again started to deteriorate in early july 2001 when the imf postponed a portion of the turkish loan. the differences between the imf and the turkish authorities were fortunately resolved and the imf approved the eighth review of turkey ’ s economic programme supported by the three - year stand - by arrangement on 12 july 2001. the imf ’ s executive board also completed the ninth review of turkey ’ s economic programme on 3 august 2001. this decision will enable turkey to draw an additional us $ 1. 5 billion from the imf. the imf is convinced that there are encouraging signs that the economic downturn in turkey is bottoming out, and that the targeted lowering of inflation is materialising, which could permit declines in interest rates. the imf is also encouraged by the considerable progress in the structural reform agenda, especially in restructuring the banking system. however, the turkish lira has again started to depreciate rapidly since the beginning of august as confidence in turkey ’ s ability to repay us $ 26 billion of debt ( before the end of this year ) has been shaken by repeated disputes between members of the governing coalition. the turkish authorities

t t mboweni : recent economic and financial developments address by professor t t mboweni, governor of the south african reserve bank, at the university of south africa, pretoria, 23 august 2001. * 1. * * introduction ladies and gentlemen, honoured guests. i wish to thank you for the honour you have bestowed on me by choosing me as the recipient of your award for excellence in managing the south african financial environment. in accepting this award and thanking you for extending it to me, i would like to make a few comments about the recent economic and financial developments in south africa. i will touch on the recent price developments, the exchange rate, and developments in other emerging markets. 2. recent economic developments towards the end of 2000 the south african economy had not been seriously affected by the world economic downturn. but by the first quarter of this year, it became clearer that we would probably be adversely affected by the slowing activity in the major world economies. as we mentioned in our latest quarterly bulletin, published in june, the recorded decline in export volumes contributed to a slowing down in domestic growth from 3 per cent in the fourth quarter of last year to 2 per cent in the first quarter of this year. although growth had already slowed from 4 per cent in the third quarter of 2000, the slowdown had largely been confined to the agricultural sector. but in the first quarter of this year, the weakness spread to other sectors of the economy. of some worry is that the sector that bore the brunt of the slowdown was the manufacturing sector. the growth rate in this sector slowed from an annualised 4. 5 per cent in the fourth quarter to a mere 1 per cent in the first quarter. this is somewhat puzzling because there appears to be strong demand for manufactured goods. domestic demand remained strong in the first quarter with household and government consumption expenditure rising and growth in real fixed capital formation and inventory investment accelerating. the welcome acceleration in inventory levels followed a steep drop in net inventory investment from the third to fourth quarters of 2000. this suggests that producers are positive about south africa ’ s future growth prospects and anticipate a sizeable increase in domestic demand. 3. price developments inflation in the prices of consumer goods and services moderated meaningfully in the first half of 2001. the year - on - year rate of increase in the consumer price index for metropolitan and other urban areas excluding mortgage cost ( cpix ) - the benchmark indicator for inflation - targeting purposes - has declined from