mr. stals discusses the current monetary situation in south africa and the implications for 1998 address by the governor of the south african reserve bank, dr. c. stals, at an investment conference arranged by huysamer stals in johannesburg on 18 / 11 / 97. 1. the task and function of monetary policy monetary policy is about money. governments give central banks the special right to issue money, and also a mandate to manage the money system in the interest of economic development. in the final situation, monetary policy is about the quantity of money, the price of money and the value of money. in the broad context of macroeconomic policy, the central bank is normally tasked with the function of protecting the value of money. this is but an immediate objective, making an important contribution to the achievement of the ultimate goal of economic policy, which is to sustain optimum economic development that will create more jobs and lead to an improvement in the standard of living of all the people of the country. monetary policy cannot be used to solve all the macroeconomic problems of a country. however, a stable financial environment with a low rate of inflation is regarded as an important precondition for the solution of many of the existing macroeconomic problems in any country. by focusing on the maintenance of low inflation, central banks do not distance themselves from the broader macroeconomic problems such as excessive budget shortages, untenable balance - of - payments deficits, short - term business cycle developments or uncompetitive international trade positions. it is indeed only in conditions of a stable financial environment, that is low inflation, that the real nature of the more fundamental macroeconomic deficiencies will be exposed, diagnosed, understood and rectified. in most cases, remedial action for structural economic ails will also not produce the required corrections in an inflationary environment. pressure is often put on central banks to harness the power of money creation for purposes other than pure monetary policy objectives, for example to facilitate the financing of public sector budget deficits, or to stimulate real demand for goods and services, or to help small businesses. pursuing all kinds of non - monetary objectives with monetary policy will, however, normally lead the country inevitably on the dead - end road of higher inflation. 2. recent monetary developments in south africa the main objective of monetary policy therefore is and should be to keep inflation low. in the absence of a national commitment to a predetermined and quantified target for inflation, the reserve

, assess their needs and objectives, manage their portfolios, construct investment strategies and allocate assets. in this regard the internet has emerged as a key competitive arena for the future of financial services. web - based commerce has added new complexity and unpredictability to the world of commercial and retail banking, mutual funds and brokers, back - office processors and financial software providers. institutions that do not have a clear strategic focus will find it increasingly difficult to maintain their positions as competition gets tougher. they will have to identify a specific focus for their business, because it may become difficult to compete successfully in all the various fields and instruments. careful planning and organisation are needed in this integrated world to ensure that the needs of clients are well served. clients have become increasingly performance sensitive. this makes it essential to monitor structures and products to keep performance inconsistencies to a minimum. 3. globalisation and financial regulation greater global competitiveness also poses new challenges to financial regulation for ensuring financial stability. the recent experience in a number of countries has clearly indicated that there is a real danger of financial instability from globalised financial markets and large and volatile international capital flows. the asian crisis was magnified by bad loans, weak balance sheets and lack of transparency in financial reporting. research shows clearly that emerging markets with sound financial systems are better able to manage the effects of international financial crises. partially in response to some negative effects of globalisation, several international institutions such as the basel committee on banking supervision, the bank for international settlements ( bis ), the world bank and the international monetary fund ( imf ) have done studies on reforming the international financial architecture. the cooperative global efforts on reform have been concentrating on five major areas. the first area is to make timely, reliable statistical data available to the market and the public, as well as information about economic and financial policies, practices and decision - making. important progress in this area includes the establishment of the special data dissemination standard of the imf and the release of public information notices following the conclusion of the article iv consultation process between the imf and member countries. it is agreed that greater transparency will enhance the understanding by the public of economic policy measures of government, strengthen credibility and make market participants less uncertain in their decision - making. the second area is the creation of internationally accepted practices. key progress in this area includes the development of the code of good practices on fiscal transparency, the code of good practices on transparency in monetary and financial policies and guidelines concerning financial