largest holdings of reserves. since 2005, the reserve holdings in a sample of emerging markets referred to earlier ( excluding china ) increased by 178 % by the year 2017. it is generally agreed that the primary motive for reserve accumulation is precautionary, as insurance against speculative attacks in times of crisis. according to research conducted by the international monetary fund 8, there is strong empirical evidence that reserves reduce the likelihood of balance - of - payments pressures in the emerging markets. reserves could provide the means to respond to exogenous shocks, and could calm or even prevent disorderly markets. central banks have, however, tended to accumulate rather than to use reserves – a phenomenon sometimes referred to as ‘ the fear of losing reserves ’. du, w and schregger, j. 2016. ‘ local currency sovereign risk ’. journal of finance 71 ( 3 ). hassan, s. 2015. ‘ speculative flows, exchange rate volatility and monetary policy : the south african experience ’. south african reserve bank working paper series wp / 15 / 02. international monetary fund. 2014. assessing reserve adequacy – specific proposals. page 10 of 11 while higher levels of reserves may create the perception of resilience, simply having reserves on their own is not an effective buffer against speculative attacks or crises. reserves do not eliminate vulnerabilities. they are not a substitute for sound policies and strong, well - regulated financial sectors. conclusion in conclusion, it would appear that, at long last, the recovery from the global financial crisis is on track. it has been a difficult path, with a number of false starts and disappointments. no doubt, the road going forward will not be without its difficulties. the recovery itself is expected to bring about new challenges, for the emerging markets in particular. it is inevitable that monetary - policy normalization in the advanced economies will happen, and that the era of high global liquidity will come to an end. the impact on capital flows and global financial markets will create particular challenges for central banks at a time when political independence is being questioned. while vulnerabilities differ from country to country, the emerging markets in general appear to be more resilient in the face of the recent market volatility. their macroeconomic fundamentals and policies have improved, making them better - placed to weather the storm than was the case five years ago. thank you. page 11 of 11

and low interest rates in the advanced economies and an absence of inflation pressures. for some time now, the world has been anticipating interest - rate normalization in the united states ( us ) in particular. to date, this has been happening at a very slow and measured pace, and has been well communicated. over the past few weeks, global financial markets have reacted to the prospect of tighter - than - expected monetary - policy settings in the us. there was a widespread market reaction to the sharp drop in us equity prices and a large spike in the vix. after the initial bout of volatility, the markets appear to have stabilised somewhat, but they remain vulnerable to further changes in sentiment and perceptions of risk. it does seem, however, that the prolonged period of easy money and highly liquid markets may be coming to an end, raising concerns about spillovers to the emerging markets who, as usual, are the innocent bystanders. the current turbulence in global financial markets coupled with the return of volatility is in some ways reminiscent of the so - called ‘ taper tantrum ’ of 2013. after a number of years of interest rates at the zero bound and quantitative easing, the world suddenly faced the prospect of a withdrawal of stimulus. the mere suggestion that the federal reserve system ( fed ) was considering a reduction in quantitative easing hit the financial markets hard. long bond yields ratcheted up in the us, raising fears that the nascent growth recovery would be reversed. in the event, the fed had to allay fears of an excessively tight policy cycle and, in reality, what tightening has occurred since then has been very moderate and well communicated. but while there are similarities to the taper tantrum, there are important differences as well. at that stage, it was only the us that was looking to tighten policy. today, the cycle is more synchronised. there are expectations for a more aggressive tightening cycle in the us than had previously been priced in, and further interest - rate increases page 5 of 11 are expected in the united kingdom. in addition, the european central bank is beginning a gradual withdrawal of stimulus. monetary policy in japan is, however, expected to remain highly accommodative. a further important difference between then and now is that, after a number of false starts, the growth recovery in the advanced economies appears to be more entrenched and broad - based. this will be positive for the emerging markets. there are also tentative