well this year, helped by the strong growth in domestic exports and higher tourism receipts as well as lower import demand. reserves are currently around f $ 1. 3 billion, equivalent to 4. 0 months of import cover. not too long ago, foreign reserves had reached critical levels of below 2 month of imports. while inflation and reserves are stable, domestic economic recovery this year has not been as firm as earlier expected, thus posing some concerns to our objectives and the economy ’ s future growth. as such, it is critical that national policies are aimed at facilitating sustainable economic growth which will create long term macroeconomic stability. to reiterate the views i shared at the private sector consultative forum on the 2010 national budget as well as at the fiji institute of accountants congress in june this year – the challenge before us is to raise growth – that is to raise investment and exports, improve business conditions, accelerate reforms, raise productivity and diversify the economy. for its part, the government remains committed to providing the needed impetus to the economy through collaboration with and providing incentives to the private sector, reduction of operational costs, facilitating competition in the economy, caring for the poor and the marginalised and pursuing plans to modernise and reform the economy. the government continues to make progress on implementing structural reforms in all facets of the public service through various reforms including the downsizing of the civil service and the implementation of a more accountable public financial management system. the restructure of public enterprises is to make them more efficient and business friendly. investments in infrastructure also remain a key priority given the government ’ s push for more investment activity. land reforms now being implemented will greatly boost investment. in particular this will give the farmers in the agriculture sector the opportunity to sub - lease or lease land from the state for investment with certainty of tenure, while improving the rental return to landowners and the state. this may also provide opportunities for greater commercial agriculture. in partnership with government, the reserve bank continues to do its best to contribute in this national effort. faced with huge challenges in financial stability early last year, the bank implemented various policy measures which returned stability to the country ’ s balance of payments position. since then, the reserve bank has implemented various other policy changes to support the government ’ s efforts to facilitate growth in the economy. in this regard, the reserve bank has taken a number of initiatives to encourage local value added and to reduce imports of goods than can easily be produced locally. in relation to this, the bank offered sponsorship

turnaround in output is expected in the major sectors for wholesale and retail, construction, mining and quarrying, hotels and restaurants, manufacturing, education, fishing and finance, all of which declined last year. not with standing the weak turnaround in overall output forecast for this year, performances in some of our major sectors so far have been encouraging. tourism has recovered very strongly. visitor arrivals are higher by around 20 percent compared to the last two years. the tourism industry is clearly on track to achieve its targeted 600, 000 record arrivals for the year. activity in the mining and export sectors is also encouraging. exports, particularly of gold, fish, mineral water and timber, continue to gain momentum, supported by favourable commodity prices. the outlook for this sector is very promising and bodes well for our balance of trade. in contrast, output in the sugar sector has been very disappointing. sugar production has been declining over a number of years. the deterioration in both cane and sugar production has been attributed to frequent mill problems which have restrained cane harvests and affected mill efficiency. unfortunately, the mill upgrade over the past three years has not been able to produce the desired results and has only added to the debt burden of the government. however, the outlook for this critical industry is positive pending the implementation of a range of reforms to bring the industry back to its glory days. it is encouraging to note the prime minister ’ s recent pledge to fix the industry and safeguard the livelihood of nearly 200, 000 people who rely on the sugar sector. consumer spending has picked up slightly from levels recorded last year, as indicated by recent partial indicators. higher net value added tax ( vat ) collections and pay as you earn collections indicate growth in private consumption. this has also been supported by strong visitor arrivals and increases in inward remittances. inward remittances which has fallen significantly over the last 3 to 4 years is recovering very strongly. against this macroeconomic background, the reserve bank continues to focus monetary policy on ensuring that the interest rate environment is appropriate and liquidity is adequate at all times to allow credit to grow. inflation has significantly trended downwards in recent months as the effect of the devaluation has fully worked through the economy. from a peak of 10. 5 percent in april, inflation has fallen to 1. 1 percent in september, and is forecast to be around 4. 0 percent or less by the end of the year. foreign reserves, i am pleased to say, have held up very