, the implementation of effective fiscalstructural reforms faces several tough challenges. first, they should preferably be part of a broad package of other necessary structural reforms. as such, the assessment of the potential impact on the economy is usually complex and requires a comprehensive approach. the technical expertise to make a correct assessment of the likely effects of reform is paramount for an efficient design. second, and closely related to the previous point, the planning of such reforms has to take into account the institutional and legal framework in each country. indeed, the political decision - making process, the type of government, the existing domestic laws, in particular at constitutional level, and external rules like those included in the stability and growth pact for european union members, are important aspects to be taken into account. sometimes, the improvement of this institutional and legal framework is in itself an important prerequisite for the feasibility and success of other reforms. third, the technical expertise required for the planning of reforms should have a strong base in the country implementing them, along with ‘ national champions ’ supporting the reforms on their own merits. domestic “ ownership ” is critical. reforms should never be understood by society as an imposition from abroad, either from the imf or from the european institutions. www. bportugal. pt fourth, careful attention needs to be paid to the communication strategy and redistributive mitigation measures. both are key to ensuring adequate support from the public and to containing populist appeals targeted at those parts of society that are potentially most adversely affected by the reforms. indeed, some of these reforms may involve long implementation periods, with transitional arrangements, and often lead to changes in the distribution of income and wealth. this may create pockets of discontent in spite of the clear overall benefits for the society. lack of understanding of these challenges by decision - makers may seriously jeopardise the expected outcomes. last but not least, the length of the political cycle often proves insufficient to provide the right incentives for the effective implementation of fiscal - structural reforms. therefore, broader agreements across the political spectrum, if possible, significantly increase the likelihood of reform success. however, by their nature and especially in those countries most in need of them, such agreements have been quite hard to achieve lately. all in all, i am convinced that sustainable public finances and better long - run economic performance pose significant challenges that should be tackled without delay. the longterm benefits of structural reforms decided today will far outweigh

2009. the external payments position is expected to remain a source of strength for the economy over the near term. dollar inflows from remittances and foreign investments are expected to remain robust. this should enable us to further build up our cushion of international reserves. on the external sector, our policies will be geared toward : ( 1 ) ensuring sustainability of the country ’ s external debt ; ( 2 ) maintaining a market - determined exchange rate with scope for occasional official action in cases of extreme movements in the peso ; ( 3 ) maintaining a comfortable level of reserves ; and ( 4 ) improving the foreign exchange environment further through forex deregulation. reforms in the financial sector will be geared toward maintaining a strong banking system and a vibrant capital market. the bsp remains committed to strengthening the banking system through structural reforms and speedier disposition of non - performing assets. at the same time, continuing asset clean - up of banks should help spur credit and investments, thereby generating support for more sustainable economic activity in the medium term. other regulatory reforms will be aimed at the further strengthening of corporate governance, risk management, and capitalization through a more effective and efficient enforcement of standards and codes. in particular, prudential regulations shall continue to be aligned with international standards and best practices. to further develop the domestic capital market, the bsp will continue to work actively with other government agencies and the private sector to complete critical market infrastructure that will enhance system integrity and overall market confidence. we will continue to push for the passage of key legislations intended to accelerate the development of the domestic capital market. in particular, we shall push for the implementation of a centralized credit information bureau to improve the quality of financial information to investors, expand private sector access to credit, minimize risks exposure of financial intermediaries, and lower borrowing costs. ladies and gentlemen. on the basis of these policy directions, the outlook for the monetary, external, and banking sectors continues to be favorable. i am now ready to discuss the issues of particular interest to you. thank you.