on the capital market. role of the capital market now what does the capital market offers to investors like you? i would like to think a lot more than you may have thought of. let us examine this in detail. like all things in life there are two sides to the market – you have a seller and a buyer. on one side, we have a buyer and in this case one who has a project and is looking for money. we normally call this person or company the issuer. on the other side, we have the seller who is selling money. we call this person the investor. what the capital market does is to bring the two sides together. compare this with depositing your money with commercial banks which is the traditional way to save money for many of us. we deposit our money with them and they in turn pay us interest. the banks then invest our monies by lending it out to borrowers. in this case, rather than the capital market, it is the commercial bank that brings the two sides together. but note three subtle differences here : • the owners of the money that is the depositors do not have any say in where their money go to and what projects that are funded from their deposits ; • the depositors do not have any say in the interest rate that they get from their deposits ; and • the depositors do not have any say in the interest rate that their money is lent out for. depositing your money may the best way to save for some of us. it has its advantages. the major one would be that the saver does not bear the risk of lending out his money. the risk is collectively shared with all other depositors. the capital market however gives you an alternative source of saving. what are the differences in using the capital market for savers? 1. diversify your savings options ; 2. secondly, the value of your money may appreciate over time unlike deposits where the principal remains the same ; 3. thirdly, you have a longer choice of maturity than the normal 3 year maximum maturity in fixed deposits ; 4. fourthly, it may give you a better return on your money ; 5. fifthly, you decide on what project or company that you want you money to go to ; and 6. lastly, if you need the money, you can break the investment perhaps at a lower cost than breaking a term deposit. if you are a borrower, the capital market can : 1. diversify your sources of

tourism therefore needs our full support while we furiously work at reviving commodity exports. we must work together to restore growth. i am confident that we can overcome the challenges and not only to return the economy to a positive growth cycle but even to lift this growth rate. however, in our pursuit of growth, we must not take the easier way out. we must build our strategy on a firm foundation – one that will last for a long time. we therefore have no choice but to address long standing reforms that are critical to lift economic growth towards the five percent mark. we know what these reforms are and we have known them for many, many years. these include sugar, land lease, public enterprise, public service and exports. next friday, the interim administration will be presenting its budget for 2007. we are looking forward to the policy content of this budget to map out for us the economic way forward. we hope that it will address convincingly the fundamental hurdles that i have mentioned. monetary policy the reserve bank has been highlighting the imbalance between exports and imports for some time now. we will continue to do so. we realise though that the solutions to this problem are largely outside the direct influence of the reserve bank itself. in many ways, we are therefore dealing with the effects rather than the cause. but we have no choice but to protect our financial position while we try to solve the root cause which is exports. solving the root cause however is taking a lot of time – a luxury that we are running out of very quickly. our task therefore becomes more difficult and complex as time slips by. over the last five years, the reserve bank has therefore used the tools available to us to stabilize the situation. we have progressively raised interest rates in the last four years. we have tightened liquidity. and since december last year we have imposed a credit ceiling on commercial banks and also reduced their delegated limits on selected overseas transactions. at this point, let me point out two things on our policy. first, we have not curtailed any foreign remittances. we only have asked that in a few types of transactions, you seek our approval if you want to remit more than the amount delegated to commercial banks. second, while the credit ceiling is in place, the reserve bank continues to encourage lending for investment. commercial banks can seek our approval for these lending on a case by case basis. no one likes higher interest rates. neither do we. but do we have a choice? in