digit inflation has been government ’ s goal for a long time. it is, therefore, encouraging to see inflation coming down in recent months, reaching a single digit level of 9. 4 % in april 2006 and dropping further to 8. 6 % in may and 8. 5 % in june 2006. this inflation out - turn has been largely due to the conduct of appropriate monetary policy aided by prudent fiscal policy and relative strengthening of the kwacha. the bumper maize harvest this season has helped to ease pressure on food prices and to keep food inflation and thus overall inflation low. distinguished ladies and gentlemen, with respect to developments in the money market, commercial banks lending interest rates have also been coming down, though not as fast as the decline in inflation and yield rates on treasury bills. commercial banks nominal weighted average lending base rate declined from 29. 8 % in 2004 to 27. 6 % in 2005. as at june 21, 2006, the weighted average lending base rate stood at 21. 6 %. clearly, there is an urgent need for commercial banks to do more to reduce lending rates in order to influence a substantial expansion of private sector credit. lower lending rates will contribute to the reduction in the cost of doing business in zambia. in the current environment of low inflation, sustainable lowering of lending rates by commercial banks should be a logical course of action. the next issue i would like to address is that of the appreciation of the kwacha against major currencies. the appreciation has occurred mainly due to the higher supply of foreign exchange on the market than demand. the key factors underlying the increased foreign exchange supply include : 1. increased copper output and exports as well as record high prices of the commodity. the volume of copper exports has in recent years registered sustained growth, increasing from 353, 000 metric tons in 2003 to 423, 000 metric tons in 2005. the price of copper rose to us $ 4, 572. 0 per metric tons in december 2005 from us $ 3, 134. 79 per metric tons in december 2004. the price of copper has since increased sharply and by may 2006 it had risen to over us $ 8, 000 per metric ton ; 2. increased non - traditional export earnings, from us $ 410 million in 2003 to us $ 576. 7 million in 2005 ; 3. improved economic confidence following the attainment of the enhanced highly indebted poor countries ( hipc ) initiative completion point in april 2005, which resulted in reduced external debt service

##di for domestic investment, growth and employment need to be examined against the benefits that domestic companies derive elsewhere in terms of expanded market base, backward and forward vertical integration and cheap skilled labour. in a globalised business environment, establishing an overseas presence becomes inevitable on account of a country ’ s policy on outsourcing, emphasis on on - shore presence, protectionism, etc. hence, the indian companies have to balance the need for domestic business expansion with the compulsions of overseas investments. likely impact of devolvement of contingent liabilities it has been observed that in the recent years, the non - fund exposure in the form of guarantees issued by indian companies towards their jvs / wos has been rising ( table 1 ). given the uncertain global environment, exponential rise in issuance of guarantees could be a potential concern for banks ( who often provide back to back guarantees ) and the indian companies concerned. impact of economic downturn of foreign economies another important aspect that has to be borne in mind is that the overseas business model could go awry due to a variety of reasons, such as, sudden downward trend of the economy as experienced during the recent global financial crisis and the eurozone sovereign debt crisis. such events may adversely impact the financials of the indian companies with a spill - over effect on the domestic corporates and banking sectors. during the periods of global crisis, indian companies may face challenges to their overseas investments. this would be on account of moderation in internal accruals and also due to the funding constraints that maybe faced by indian jvs / wos arising out of faced by the multinational investment banks and financing institutions. indian corporates who had acquired overseas assets at much higher premium in a bullish phase of business cycle or did not undertake intensive due diligence before such acquisitions in anticipation of future growth, potentially risk huge valuation loss during the downturn. ensuring security through strategic acquisitions the emerging economies are becoming increasingly conscious of ensuring security in the fields of energy, commodity and food for the future generations. this has led to a spate of strategic acquisitions in the recent past, notable among them being acquisition of coal mines, oil fields etc. proposals for acquisition of overseas assets, particularly in the energy sector through special purpose fund or through the psus in the related field are now being discussed for long term strategic benefit of the country. various options of funding are also being debated. given the nature of our foreign exchange reserves, which have not been built out of surplus,