operational approach. there are nonetheless major questions about the effectiveness of the combination of conditionality, concessional loans, and debt relief. these can be summarized by recognizing that many countries that received conditional debt relief once, received it again – and again. the underlying question is why it has turned out to be so difficult for many of the poorest countries to begin to grow on a sustained basis, despite receiving aid that amounted to double digit percentages of their gdp over long periods, and despite being in imf and world bank programs. i suspect that if we were to go back to the participants in paris club discussions in the fifties and sixties, they would say that income levels in many of the countries whose debts they rescheduled are much lower today than they would have imagined in their most pessimistic moments. these concerns relate mainly to some african countries. many african countries have been growing more rapidly recently, so maybe we are beginning to turn a corner. the renewal of growth is helped by the global commodities boom, and the fact that several african countries are now exporters of oil. developments in south africa are encouraging, and south african growth affects the countries around it. nigeria too is making progress, helped by a paris club agreement and by the price of oil. but the facts remain that the number of people in poverty in africa is increasing, that a greater share of the world ’ s poor live in africa than ever before, and that aids and other diseases are exerting a devastating effect on populations in many countries. it is easier to raise questions about the effectiveness of conditional debt relief than to answer them. for the problem is not particularly that of conditional debt relief, it is rather the question of what development strategies are most likely to succeed. i will not go into that question in any detail now, beyond saying that while we know many of the necessary conditions for growth, we do not yet know the sufficient conditions. over the course of its lifetime, paris club rescheduling became increasingly far - reaching. the original approach of flow rescheduling combined with new money lasted for about thirty years. in the late 1980s under the brady plan, paris club reschedulings began to include relief on the stock of debt. now we all know that to a first approximation what matters is the present value of the debt, so that there is no difference in the economics of flow versus stock reschedulings. 1 nonetheless the shift from flow to stock debt reduction was a major change

meetings with other central bank governors, we discuss the economic situation. in the last meeting, two days ago, they started speaking of optimistic signs. we are currently following an expansionary monetary policy, but we must be ready to change direction if and when necessary, but not before. the markets and the bank of israel expect the april cpi to rise by about one percent. nevertheless, nearly all forecasters expect inflation in 2009 to be below 2 percent, and we do not intend to react to one month's index, especially if it affected by seasonality. the governor of the bank has the role of economic adviser to the government. the budget deficit is expected to be six - and - a - half percent of gdp this year, and five percent next year. growth this year is expected to be a negative one - and - a - half percent, with a rise in the debt / gdp ratio. this is not an advisable direction for the economy to follow. what is of concern is that the debt / gdp ratio at the end of the decade may be back where it was at its beginning. in order to prevent the deficit reaching above 6. 5 percent this year and 5 percent next year, expenditure must be reduced. there are several ways of achieving that, e. g., cutting public sector wages and / or postponing reductions in tax rates. with regard to the current deficit, i suggest starting with the 6. 5 percent of gdp deficit this year and 5 percent next year, to make it very clear that the path is a downward one. 2. the second of this year's objectives is the new bank of israel law. the current prime minister and the minister of finance when i took up office expressed support on this issue, and that was one of my conditions on accepting the position. why is the new law so important? there are several reasons : the new law will formalize the independence of the bank ; it will specify the bank's obligation regarding transparency ; there will be a monetary committee that will make interest rate decisions together with the governor ; and there will be an administrative council that will approve administrative decisions. why is a decision by committee preferable to a decision by an individual? research has shown that on average, decisions made by a committee are better than those of a single decision maker. the current bank of israel law is 55 years old. 3. the third task relates to the integration of israel's economy into the global economy. progress has