under current abnormal circumstances. the further danger we face is that as the balance sheets of the central banks expand rapidly, down the line there may be inflationary pressures. central banks will have to be ready to absorb this excess liquidity, but without killing off the recovery. 4. 6 the g - 20 recognises that even within the framework of a co - ordinated response, local conditions will shape the nature of the response of individual countries. while many countries responded with substantial interest rate reductions, these responses were carried out in the context of very low inflation in many instances, and the need to provide liquidity to ailing banking sectors. while the response of the south african reserve bank may appear to be less strong than in many other countries, it should be borne in mind that we started out with a relatively high inflation rate and a relatively healthy banking system. we are seeing a slowdown in the rate of inflation and, although it is relatively sticky, we still expect to be back within the target over the medium term. this has allowed for a 350 basis point reduction in the repurchase rate to date. a continuation of this slowdown of inflation, in part a result of the widening output gap, may allow for further monetary easing. 4. 7 as part of stimulus packages, many countries have focused on increasing expenditure on infrastructure. this cannot happen overnight. we have been fortunate that our infrastructural expenditure programme has been accelerating for the past few years, and has therefore come on stream at a time when it is most needed. this has been most fortuitous. anyone travelling on our national roads will have been frustrated by the inconvenience of the scale of the road upgrades, but we have to remember the positive side : that this infrastructural expenditure is helping to underpin domestic expenditure. furthermore, such expenditure will help to increase the potential output of the economy over time, and therefore raise the sustainable long term growth rate. according to national treasury estimates, public sector infrastructure expenditure is expected to average 9, 7 percent of gdp over the coming three fiscal years, compared to 4, 5 per cent in the 2005 / 6 fiscal year. during the current fiscal year, total expenditure by the sa national roads agency ltd ( sanral ) on roads is estimated at r19, 6 billion, compared to r2, 2 billion in 2005 / 06. i am sure your truck drivers will be pleased when all this construction is completed. 4. 8

long - run investment and growth, and thus fulfil its constitutional mandate of ‘ protecting the value of the currency in the interest of balanced and sustainable economic growth in the republic ’. concluding remarks the mpc faces a difficult balancing act. we do not want to unduly constrain an already weak economy, but we must also ensure that the average south african ’ s purchasing power remains intact. hence, the repo rate may rise gradually over the medium term, in a manner consistent with keeping inflation inside the target range. however, we are not bound to any particular path of action. rather, the mpc will continue to conduct policy commensurate with the forecast and the balance of risks as these stand at the time of each meeting. thank you. page 8 of 8