their fx obligations, resulting in further improvements in the country ’ s external debt ratio. as of end march 2008, the external debt ratio stood at 35. 6 percent, less than half its level in 2001 of 72. 9 percent. the peso has weakened in recent months. on a year - to - date basis, the peso depreciated against the us dollar by 12. 3 percent as it closed at p47. 09 / us $ 1 on 15 september 2008. this is on account of rising risk aversion due to worries over global economic slowdown and credit tightening. concerns over rising inflation further added pressure against the peso. for the period 2001 - 2008 ( to - date ), the peso appreciated by 9. 1 percent, generally in tandem with most currencies in the region. the philippine peso has been generally competitive against our major trading partners and competitors in real terms. if we take 2001 - 2002 as the comparator period given both good gdp and inflation numbers, coupled with the manageable external payments position, the end points remain broadly on the same level. on the financial sector, the banking system remains generally sound and stable. the banking system ’ s asset base has been expanding steadily. the continued asset clean - up of banks, accomplished without the use of public funds, has enhanced asset quality, bringing the npl ratio closer to the pre - asian crisis level of around 4. 0 percent. banks remained capitalized at levels above both the bsp - regulatory requirement and the bis standard. owing to reforms earlier instituted, the philippine banking system has not been significantly affected by the financial stresses experienced from the us subprime mortgage market. furthermore, the philippine domestic banks ’ exposure to structured products, such as clns and cdos, issued by investment houses like lehman brothers has been limited and are well cushioned by banks ’ capital base. however, we continue to closely monitor developments in the global financial markets, including further risk aversion against emerging markets including the philippines, as these may adversely impact the growth of the banking sector. where are we heading? the inflation path is expected to be hump - shaped, with the peak around sept / oct this year, after which we expect a gradual leveling off. we expect to see the single - digit level again by late q1 / early q2 next year. nevertheless, the forecasts still indicate that inflation could exceed the 2008 and 2009 targets. the bop surplus by

##insurance ; and ensuring the sustainability of our external debt. these policies will continue to promote strong fundamentals that will help reduce the economy ’ s vulnerability against global economic risks and support the needs of a more dynamic and globally integrated economy. in the financial sector, we remain firmly committed to sustain key reforms that will lead to greater efficiency, effective risk management, stronger capital base and improved corporate governance standards in the banking system. these financial and banking sector reforms will continue to raise savings and help boost financing for productive activities. in summary, let me assure you that the bsp is prepared to take all necessary action to address the threat of high inflation and promote price stability. we stress here that high inflation erodes the community ’ s purchasing power, reduces their consumption expenditure and slows down economic growth. we are therefore mindful of the impact of our monetary policy action on the economy ’ s growth momentum. the resiliency of our economy allows us to have greater flexibility in responding to the challenges that come our way. thank you very much.