be generated while the risks were often regarded, wrongly, as negligible. this transformation of the financial sector was facilitated by the “ light touch ” regulation practiced especially in the usa and uk. light touch regulation was partly motivated by a belief in the efficiency of financial markets that now looks naive, partly by the desire of governments to attract globally mobile financial services to their own territories and partly by regulatory capture. however, rapid expansion of balance sheets and the assumption of risks that were not properly understood created financial fragility in many financial institutions, including those which had been bastions of the financial establishment. furthermore, the complexity of the modern financial system and opacity of many new financial instruments created enormous uncertainty among investors as to where risks were actually held. allied to the increasing importance of transactions in securities markets, for example to source funds for bank lending and the growth of a shadow banking sector, this served to increase the vulnerability of the financial system to systemic risk. it was the systemic risk to the financial system that forced governments in several countries to risk huge sums of public money to bail out distressed financial institutions, even though the problems faced by these institutions were largely of their own making. impact of the global crisis on africa in contrast to some of parts of the world, most countries in africa, including uganda, have not suffered direct contagion from the financial crisis in the developed economies. although there are substantial capital flows between africa and the rest of the world, banks in africa have virtually no exposure to the developed worlds ’ toxic assets. nor do african banks depend on wholesale securities markets for funding, unlike many banks in the developed world. as a consequence, neither the asset quality nor the liquidity of most african banks has been directly impaired by contagion from the financial crisis in the developed economies. furthermore, most african economies have not funded large current account deficits with short term external private borrowing. hence they are not at risk of a capital account crisis, in contrast to some of the transition economies in eastern europe. for these reasons most african economies have not suffered systemic failures in their financial systems as a result of contagion from the global crisis not have they been forced to adjust to sudden stops in their capital accounts through draconian expenditure reduction. nevertheless, the impact of the global crisis is being felt in africa, although it is somewhat more muted than in some other parts of the world. the sharp slowdown in global growth affects africa, including uganda, through its impact on demand for

weakens when investors leave the swedish market for ones considered a safer investment. this was particularly noticeable during the mexico crisis of 1995 and the asia crisis of 1997 - 98. the recent unrest on the financial markets in connection with uncertainty over the global business climate has once again had a negative effect on the krona. following the terrorist attacks in the usa we saw a further depreciation of the krona ( and for some other minor currencies ), as well as a weak development in the stock market. finally, the generally stronger dollar must be mentioned as one of the explanations for the weak krona. some of the dollar's strength can be attributed to higher productivity in the usa, but most economists still believe the dollar to have been overvalued on the basis of traditional economic theory. the krona has thereby been steered to some extent by factors that are not connected with the economic situation and developments in the real economy. this means that the weak krona does not function fully as a shock absorber against the outside world. sweden has an undervalued currency despite our economy developing as well as other countries'economies. the monetary policy problem is that a weak krona risks creating inflation via import prices, which in turn can force a tighter monetary policy stance than would otherwise be necessary. there are international examples of how the exchange rate, instead of acting as a shock absorber, has rather worsened the effects of an economic slowdown. japan and switzerland have experienced prolonged crisis periods during the 1990s, while their currencies have remained very strong and have thus caused problems for the export industry. one effect of the weakening of the krona that we have now is that the export industry and the competitive import industry should become more competitive in the short term. however, there are some structural problems here : an unmotivated weak exchange rate risks strengthening certain parts of the export industry that do not constitute expansive future sectors. sweden's future hardly lies in competing with low costs and prices, but rather with quality, cutting edge technology and know - how. when the krona eventually appreciates to a level more motivated on the basis of fundamental factors, sweden will have an industrial structure poorly equipped to meet the requirements of the future. conclusions the riksbank assumes that the krona will appreciate. it is possible that we have already seen the beginning of this development very recently. when the upturn does take place, it may prove even stronger than the riksbank estimated in its latest