. in this regard, only a few weeks ago, the independent evaluation office reported on exchange rate surveillance for the period 1999 - 2005 and concluded, among others, that “ the imf was simply not as effective as it needs to be in both its analysis and advice, and its dialogue with member countries ” 5. this shows that, in this case, there is unanimity that there is need for change. a. mirakhor & i zaidi ( 2006 ) “ rethinking the governance of the international monetary fund ” imf working paper wp / 06 / 273. r. cooper & e. truman e. ( 2007 ) “ the imf quota formula : linchpin of fund reform ”. independent evaluation office ( 2007 ), “ imf exchange rate policy advice, 1999 - 2005 : an ieo evaluation ”. on a related matter, the policy support instrument ( psi ), which was introduced in october 2005, was in recognition of the fact that fewer countries need to borrow from the fund. while it is acknowledged that one contributing factor to the reduced need for fund lending is the extent of success of imf programme implementation in the past, this reduced recourse to fund resources should not lead to member countries ignoring the fund ’ s reform programmes and policy advice, because doing so would be counter - productive. i hasten to add that, although not a borrower of fund resources for programme assistance, botswana values her long - term partnership with the fund. there is absolutely no doubt that fund advice has largely been beneficial ; so too has technical assistance. however, in the advent of the psi, we should ask whether it has moved far enough from the poverty reduction and growth facility ( prgf ). is there still too much prescription and not enough discussion? is the fund ’ s endorsement of policies still so important for member countries, given the increased opportunities for funding provided by financial globalisation? and what are members to do when the assessments by the fund and world bank differ radically? it will be interesting to see the number of countries, if any, that have so far taken advantage of the programme, now that the psi fact sheet is published on the imf website. furthermore, the fund needs to change its approach to surveillance and, accordingly, some important structures of the fund, such as the imfc, have suggested that surveillance needs to become more advisory than prescriptive. it is felt that such an approach would encourage country ownership of decisions resulting from

to, not least because it does have economic consequences as well as implications for social capital and the public ’ s trust in a state ’ s institution monetary policy decisions inevitably affect financial markets, and the wider economy. this is why central banks must have a clear mandate, which in the case of the euro area is of course price stability. we also conduct proportionality assessments, which include analysis on the benefits and the possible side effects of monetary policy measures, their interaction and their balance over time. overall, central banks do not have the mandate or the tools to deal with societal concerns around excess income or wealth inequality. 29 governments are best placed to address the concerns in their societies around these developments. but we do need to ensure that while we take our decisions with a clear goal in mind, we also understand the side effects of our actions and that they do not outweigh the benefits. conclusion there are three things i suggest we should bear in mind. first, central banks need trust to succeed. trust is stronger where social capital is strong. central banks can help build social capital through their actions. second, social capital is an important determinant of a community ’ s wellbeing, alongside human capital, natural capital and financial and physical capital. ( i like to describe these capitals as our collective “ economic capital ” 30 but that is a subject for another day. ) an important fact is that social capital does not grow on its own. an economy, a society and its environment are all complex systems that constantly interact with each other. societies need to invest in economic, social and environmental infrastructures – including institutions such as central banks – to enable social capital to grow. third, stasis is not an option. the frameworks we operate with, the ideas that “ ramify … into every corner of our minds ”, must be capable of change. 31 as i said, preserving institutions could also weaken them. our challenge is to understand how and when our frameworks need to change. we need to be ready to challenge familiar paradigms, as one way of eroding social capital is to ignore the need for change. so where does this leave us? well for me, back to the beginning and back to the present. back to the beginning, in the sense that at their core central banks exist to provide monetary stability. back to the present, in that inflation has continued to surprise on the upside because of unexpectedly high energy costs. the path for our monetary policy will continue to