always comes a time when the government will not be able to produce the proverbial rabbits out of its fiscal hat. our only resource is human capital. endowed with poor human capital, no country in today ’ s dog - eat - dog world can comfortably find itself in a good stead to compete. poor human resources combined with lop - sided industrial relations legislations are certainly not a recipe for modernization and growth. the quality of human capital matters enormously if we do want to break out of the middle income trap. the unfortunate thing about building a dependable human capital stock is the very long gestation period of investment in human resources. this is a problem readily remediable. just open up ; import the talent and the skills. two other factors, amongst others like innovation, that are critically important for the sustenance of competitiveness are the exchange rate of the rupee and wage levels in the economy. for quite some years in the past we have had a strong rupee. capital inflows in the equity market and in other areas of the economy appreciated both the share prices and the exchange rate of the rupee which, in turn, attracted more investors thus carrying the exchange rate of the rupee considerably away from its fair value. the sustained large current account deficit for several years reflected the extent to which the rupee had deviated from its fair value. as is well known, an overvalued exchange rate encourages consumption, particularly of imported goods, and is a deflationary factor as far as the domestic economy is concerned. sustained over a long period of time, an overvalued exchange rate undermines the competitiveness of the export sector. in our situation, competitiveness was further aggravated by an anachronistic system of determining wages and salaries that completely ignores the health of the economy. it ’ s a system that works like drug. the more you give the shots, the more you get addicted – until you drop dead. there is a correct value of the exchange rate of the rupee that balances the needs of growth on the one hand and consumption on the other. in 2015, there was a consequential re - alignment of the exchange rate of the rupee. the structure of the mauritian economy has evolved over the years. in this regard, i need to underscore one point for the benefit of the business community present here tonight : an exchange rate level that is good for our exports sector is not necessarily good

and technology of money. milton friedman made use of mill ’ s characterisation of money as a machine when describing ‘ what monetary policy can do ’ in his seminal address to the american economic association in 1967. in 17th century england, goldsmiths would take custody of their customers ’ gold and issue a paper note in receipt. these notes evolved to become payable to “ the bearer ” rather than just the original depositor making it more convenient for people to carry and exchange the paper notes, rather than the underlying gold. realising that it was highly unlikely that all of their customers would want to withdraw all of their gold at any point in time, goldsmiths soon began to issue more notes than the value of the gold in their vaults, by making loans. thus goldsmiths formed the basis of modern banks, and could create money in much the same way as banks do now. all speeches are available online at www. bankofengland. co. uk / speeches we are not, i am pleased to say, seeing today the sorts of issues that arise when the ‘ machine ’ of money, to use mill ’ s words, ‘ gets out of order ’. but we are seeing changes in the technologies that support money in our economy. and given, as i will explain, that the bank of england ’ s role is essentially the stewardship of the money of the uk, that is something we need to understand and to which we need to be ready to respond – calmly and carefully. before discussing some of these changes and the role of the bank, it is worth dwelling a little on what money actually is. this being the ppe society, i am sure you know the standard answer : money, as you learn on an economics course, has to be all of three things : a means of payment – everyone has to be able to buy things with it ; a store of value – everyone has to be able to hold their wealth in it ; and a unit of account – everyone has to use it as a common measure of the economic value of things. this is as good a practical description as you can get, though defining the boundaries is not easy, as monetary statisticians know. it is, essentially, a description of what money does rather than what money actually is. mill and friedman describe money as a machine but perhaps a better description is a technology. but it is not a physical technology – metallic, electronic or otherwise, though its embodiment may take any number of physical forms.