of prices, in shekels, of imports to israel indicates a decline in the past two years, both because the composition of our imports included groups of goods that declined in price, and because a marked share of imports are from countries using the euro, which as known weakened markedly against the shekel. another factor acting in recent years to moderate price increases is a change in israeli consumption patterns, reflected in, for example, an increase in consumer purchases from abroad primarily via the internet. this became stronger with the expansion of the customs exemption on personal imports in 2012 and again at the end of 2014. beyond its direct impact, personal imports act to increase competition among domestic manufacturers and marketers of many consumer goods. although price reductions initiated by the government diminished in 2016, they still contributed to a decline of approximately 0. 2 percent in the 2016 cpi. despite the labor market being near to full employment, in recent years the decline in inflation expectations was reflected in an only moderate increase in nominal wages, which together with the decline in the cpi essentially became an increase in real wages at a solid pace. this was reflected in a marked increase in consumers ’ purchasing power, and supported the continued growth in private consumption. from the perspective of its impact on inflation, producer prices increasing while consumer prices decreased were reflected in — until recently — unit labor cost which did not increase, so that labor costs did not create pressure for increasing prices, while at the same time the increase in purchasing power as a result of the increase in real wages supported growth of private consumption. fiscal policy in the past two years the deficit in actuality was about 2 percent of gdp, considerably lower than the deficit ceiling. with that, it is important to look at the estimate of the cyclically adjusted deficit — an estimate that takes into account the effect — on tax revenues and on some components of expenditure — of where the economy stands in the business cycle. from this viewpoint, the deficit increased in 2016, as a result of a real increase of 5. 6 percent in expenditure while reducing tax rates, and it is high by international comparison. that is, budget policy also supported, alongside monetary policy, the expansion of economic activity. the share of debt in gdp continued to decline in 2016 as well, in contrast to the trend in most oecd countries, and this welcome trend acted to continue providing sources in the budget due to the decline in interest payments on the debt. in recent years, various factors acted to reduce 2 / 4 bis central

is well known that the sme sector is a key contributor to growth and employment, including and perhaps especially in the transition countries. it is equally well known that in most countries this is a difficult sector to finance : the financing of small and medium scale enterprises requires detailed local knowledge of the relevant companies and entrepreneurs, and is likely to be very labor - intensive. this work is best done by local financial institutions, which are more likely to have developed branch networks that enable them to understand both the economic conditions facing these companies and the quality of the firms'management. the ebrd has been successful in promoting sme financing in several countries, including in russia, through onlending to local financial institutions. the bank's work and familiarity with financial intermediaries throughout the region has increased its effectiveness in assisting smaller enterprises in its countries of operation. it is highly desirable that the bank continue to promote sme lending, especially in the countries of this region, both through its lending and by helping create a business environment in which the private sector can flourish. at the same time, let me put in a plug for the potential role of microfinance in helping even smaller businesses than the smes to obtain financing, and also in helping the poorest consumers to obtain access to the financial sector. governments can contribute to this process by ensuring that their regulatory framework does not discriminate against microfinance institutions. private sector financial institutions can contribute by working together with microfinance institutions, for instance by helping them gain access to financing and by assisting in the development of microfinance products. the ebrd has been successful in promoting sme financing in several countries, including in russia, through onlending to local financial institutions. the bank's work and familiarity with financial intermediaries throughout the region has increased its effectiveness in assisting smaller enterprises in its countries of operation. it is highly desirable that the bank continue to promote sme lending, especially in the countries of this region, both through its lending and by helping create a business environment in which the private sector can flourish. 2. local currency financing governments in several regions have been attempting to develop local currency bond markets in which foreign investors and institutions participate. in part this is designed to deal with the so - called problem of " original sin ", according to which developing countries are able only to borrow internationally in foreign currencies, and consequently suffer financial losses in their own currency if forced to devalue. despite the belief that original