critical – countercyclical fiscal policy to sustain demand through supporting jobs is important at the initial recovery period – in the medium term, fiscal policy should be directed firmly towards growth and long term development objectives – adequate capital spending should be a top priority to address large deficits in infrastructure and human capital • central banking in post - crisis africa – inflation in most countries has reverted to single digits, and the likelihood of a significant liquidity overhang is minimal – in many countries exchange rates have also been strengthening towards the precrisis level. re - correction after the crisis – all these factors point towards retaining the current supportive monetary policy stance in most countries and for central banks to avoid conventional wisdom to raise interest rates soon – central banks should be in no hurry to tighten their policy rates when underlying inflation is below target. they need to continue with the same monetary stance until the expected inflationary pressure threatens instability in the economic environment what the central bank of kenya has done during the crisis • the central bank of kenya – has pursued an accommodative monetary policy stance to help cushion the economy from the negative effects of the global financial crisis • measures taken so far – reduction of cash reserve ratio from 6 % to 4. 5 % ( 100 basis points in december 2008 and 50 basis points in july 2009 ) – thus releasing an equivalent of ksh. 12. 5 billion for lending to the economy – consecutive reduction of the central bank rate from 8. 75 % to 7. 75 % to signal to banks to lower lending rates – allowing a reduction in foreign exchange reserves to less than 3 months to take pressure off the depreciation pressure of the kenya shilling vis - a - vis the hard currencies ( had the cbk not allowed this, the inflationary effect of the shilling ’ s depreciation would have been worse – in terms of intermediate imports, oil prices etc ) kenya ’ s fiscal policy attempts to spur economic activity during economic downturn the 2009 / 10 finance bill took recovery head on – six solutions : • commitment from treasury to maintain a stable macroeconomic environment • creating fiscal space through expenditure rationalization from non - productive sectors / activities to productive sectors • reducing the cost of doing business • developing key infrastructure facilities and public works to stimulate growth, employment and poverty reduction • fiscal stimulus through measures that expand economic opportunities in rural areas for employment creation global outlook • the fear of the “ second great depression ” has subsided – impact of the crisis on output has been ameliora

of constant change and innovation. and, especially since the mainland ’ s reform and opening up, we have always been a testing bis central bankers ’ speeches ground, a buffer zone and a springboard. when hong kong ’ s manufacturing base moved to the mainland, we changed to trade intermediation and focused on logistics management and offshore trade. we also developed our services industries, especially high value - added and modern services including professional and financial services. our economy has always adapted and transformed itself in response to the constantly shifting economic landscape of the mainland and the rest of the world. conclusion : levering the mainland while engaging the world 12. the pivot of the mainland ’ s economic growth is expected to shift to domestic consumption, innovation and efficiency enhancement, as well as market opening. there will also be more mainland companies investing abroad. the prospects of hong kong rest on whether we can ride on this trend, developing and introducing the right products and modern services for the mainland market ; whether we can attract more mainland companies to use hong kong as the springboard to go global, and anchoring in hong kong their operating and treasury centres for overseas expansion. 13. i have always been optimistic about hong kong ’ s future. yet my optimism rests on the very presumption that hong kong people would continue to make the right choice for our future. indeed it is our choice : what ’ s the way forward? where will it lead us? we could well choose to indulge in past success and languish in self - pity, fretting that our monopoly access to the mainland market would chip away as reform and liberalisation continues to take hold. we could choose to squander our time and opportunities resting on our laurels. alternatively, we can choose to maintain a healthy and positive interactive relationship with the mainland on the basis of “ one country, two systems ”. we can cherish the hard - earned success made possible by the concerted efforts of generations of hong kong people and pass on our “ cando ” spirit. we can also capitalise on our strategic position to leveraging the mainland while engaging the world. i trust and remain hopeful that we would make the right choice that promotes hong kong ’ s prosperity, maintains our stability and leads us to a bright future. bis central bankers ’ speeches