sustainable, as reflected by low and declining debt - to - gdp ratio. the philippines also enjoys improving labor dynamics, with the labor force becoming more educated. this bodes well for attracting more investments that generate higher paying jobs. this means our economy can grow at a much faster pace than decades ago – thereby unlocking more opportunities to pull more people out of poverty – without the risk of stoking up inflation. without such risk, strong economic growth can be sustained over the long haul. second, within - target inflation. after being elevated last year due to supply - side factors, inflation has reverted to within the target range of 2 to 4 percent. this is credited to a series of monetary actions by the bsp that addressed brewing secondround effects combined with and non - monetary actions by the government that addressed bottlenecks to food supply. with the bsp ’ s amended charter, we will ensure that we maximize its provisions to better fulfill our core mandate of price stability. under the new charter, the bsp is now allowed to issue its own debt instruments. being able to issue our own debt instruments allows us to better manage liquidity in the system. with my appointment to the bsp last march coming shortly after the signing into law of the bsp ’ s amended charter – a legislative reform that was decades in the making – i consider it my primary duty to ensure not just its implementation but also the maximization of its provisions for 2 / 5 bis central bankers'speeches the benefit of the economy and the filipino people. third, comfortable external payments position. based on the latest estimates, the country is expected to post a us $ 3. 7 billion surplus in its balance of payments this year. thanks to solid foreign exchange inflows in the capital and financial account, the deficit in the current account is more than adequately covered. talking about the current account deficit, this is not something out of the ordinary, especially for a growing economy like ours that is investing vigorously in its future through an aggressive public infrastructure drive. with rising public and private investments, importation of rawer materials, intermediate goods, and capital equipment has also been growing. this explains the current account deficit, which nevertheless, is financeable, given robust foreign exchange inflows in the financial and capital account. driving the country ’ s bop surplus are reliable inflows of overseas filipinos ’ remittances, business process outsourcing ( bpo ) revenues, and tourism receipts. together, the

embedded in these instruments. these considerations lead to the third set of issues that relate to the role of effective financial regulation and supervision. has the recent crisis underscored the need for strengthening of oversight of financial markets in advanced countries? traditionally, financial surveillance has placed relatively more emphasis on banking regulation. banks are leveraged financial entities who are also effective trustees of public money by virtue of holding deposits. hence, they have to be effectively regulated and supervised in order to maintain public confidence in the banking system and depositors have to be protected from excessive risk - taking by banks. on the other hand, investors in hedge funds are high net worth individuals who do not need such protection. they are informed investors who are able to exploit the information efficiency of markets and, therefore, should be able to understand the risks implied by information asymmetry. the current crisis was, however, triggered by the difficulties encountered by these investors who had taken large exposures to sub - prime mortgage investments without having accounted for the potential risks embedded in these instruments. what has been our approach to these issues? although there is a current move in some jurisdictions, particularly in the u. k., to move towards “ principles - based ” regulation, from the traditional “ rules - based ” regulation, we are continuing with the traditional rules - based regulatory approach for now. while progressively providing greater flexibility to banks in their portfolio decisions, relative to the situation before the reforms, we have kept a close eye on the risk exposure of regulated financial institutions. we have therefore been cautious about derivatives and are introducing them gradually, based on our perception of the risk management capabilities of the various regulated institutions. admittedly, this does cause impatience in those institutions that believe their risk management capacities to be of a high order. however, the issue that we have to consider is the reality of the large variance between different institutions in such capabilities. it is true that financial markets cannot be held hostage to the most laggard institutions. so, we have adopted a measured approach to the introduction of modern financial innovations. second, we do monitor the exposures of banks to risky sectors and seek to limit their exposure to such sectors through prudential regulations. banks exposure to capital markets in all forms ( both fund based and non - fund based ) cannot exceed 40 per cent of their net worth. similarly, as we observed very high credit growth in certain segments such as real estate, housing, non banking finance companies ( nbfcs ) and other retail credit, risk