foreign debt well within appropriate levels. at the end of december 2003 the foreign debt of the national government amounted to only 6, 0 per cent of gross domestic product. in the domestic market the government ’ s strategy has been aimed at reducing borrowing costs and risk, managing maturity profiles, diversifying funding instruments, increasing transparency and building credibility. the marketing of government debt through primary dealers was introduced in 1998, followed by a debt consolidation programme in 2002. the funding instruments were also diversified from fixed income bonds and treasury bills to inflation - linked bonds, variable rate bonds and retail bonds. moreover, considerable progress has been made in improving cash management through investments in interest - bearing deposits. as a result of all these measures the government has been able to reduce its net loan debt from a peak of 48, 1 per cent of gross domestic product in fiscal 1996 / 97 to 36, 8 per cent in 2003 / 04. this not only contributed to lower interest payments on total public debt, but also to generally lower long - term yields in the south african capital market. the prudent measures applied by government have brought about a decline in government net dissaving from the high level of 7, 3 per cent of gross domestic product in 1992 to 1, 1 per cent in 2003. 5. monetary policy the more normalised relations with the rest of the world made it possible for the authorities to focus monetary policy on the creation of a financial environment that would be conducive to the attainment of the growth potential of the country. the objectives of monetary policy at the beginning of the 1990s were to reduce the rate of inflation to the average rate of inflation in trading partner and competitor countries ; to manage the money creation process in such a way that an adequate, but not an excessive amount of new money would be supplied to the system ; to maintain positive real interest rates ; to increase the gold and other foreign reserves to a comfortable level and to develop a sound financial infrastructure consisting of healthy financial institutions and financial markets. in the 1990s the reserve bank also intervened heavily on its own initiative in the spot and forward market to influence supply and demand in the foreign exchange market. these operations were undertaken to smooth out large short - term fluctuations in the exchange rate, but it was explicitly stated by the bank that it did not target the level of the exchange rate. the extent to which the bank intervened in the foreign exchange market was clearly reflected in the changes in the net open position in foreign reserves ( nofp ), i.

effect that this position had on foreign investments into south africa and the assessment of domestic economic conditions of international rating agencies. the nofp was accordingly reduced from the peak oversold position of us $ 23, 2 billion at the end of september 1998 to an overbought position of us $ 0, 9 billion at the end of july 2003. the reserve bank then shifted its focus to reducing its oversold forward book and to gradually strengthen the official foreign exchange reserve position. as a result of the appreciation in the exchange rate of the rand, the oversold forward book of the reserve bank amounting to us $ 4, 1 billion at the end of july 2003 and was quickly turned around to an overbought position of us $ 38 million at the end of february 2004. the official foreign exchange reserves of the country was also increased from us $ 7, 6 billion at the end of december 2002 to us $ 10, 0 billion at the end of april 2004. it is now the objective of the reserve bank to increase its foreign reserves further in a gradual manner whenever the underlying circumstances allow it to do so. 6. the financial sector in the period of political and economic isolation during the 1980s the domestic financial sector continued to grow rapidly. many improvements were made to the regulatory framework such as the creation of a uniform legal framework for all deposit - taking institutions ; the establishment of appropriate structures for the markets in new financial instruments ; and the revision to rules governing the marketing of equities, bonds and derivatives. moreover, the authorities endeavoured to promote proper risk management procedures and internationally accepted principles with the objective to preserve the soundness of financial institutions. the efforts made to maintain an effective and efficient financial sector were hampered by the lack of co - operation with foreign regulators due to the political circumstances at that time. as a consequence, some regulations and practices started to deviate from international best practices. with the re - establishment of normal relations with the rest of the world in the 1990s, great efforts were made to bring the rules and regulations on the activities of financial institutions in line with international norms and standards. from 1994 south african financial institutions started operating on an increasing scale in major international financial centers as well as opening branches or subsidiaries in other african countries. as part of this process, five large domestic companies transferred the primary listing of their stock to foreign bourses. this change gave them greater access to capital resources at lower cost and provided them with opportunities to promote their core business into other countries and regions. all