the face of tight control on final goods prices. dampened prospects for profits in turn may lead to delays of planned investment. while this downside risk is substantial, there is also an upside. higher commodity prices strengthen farm income, which tends to benefit a large section of the thai workforce. ladies and gentlemen, the risks to global growth and global inflation have both increased in the near - term. at this point, we cannot be sure how the slowdown of global growth will affect global inflation this year. and even though, from an asset price perspective, there is a positive probability for a correction in oil and commodity prices going forward, we cannot be certain that such correction will be substantial enough to bring the inflation risk down. one thing is more or less certain, however : global financial interconnectedness almost all but ensures that we should expect higher financial volatility in the near term, as market players alternate between yield - seeking and risk - aversion investment strategies. the bank of thailand is closely monitoring the situation and assessing the impact on thailand ’ s financial and economic stability. given the pickup in domestic growth momentum and various risks the thai economy is likely to confront, the monetary policy committee expected thailand ’ s gdp to expand by 4. 5 - 6 per cent this year while inflation excluding raw food and energy should remain within target of 0 - 3. 5 per cent for the next 8 quarters. in the face of rising food and energy prices, headline inflation is expected to hover between 2. 8 - 4 per cent in 2008, but is expected to come down next year. i want to note however that the monetary policy committee ’ s new forecast will be given in april along with the latest inflation report. ladies and gentlemen, i have talked at length about the economic outlook and risks going forward. what then is the appropriate course for monetary and exchange rate policy that i think can help cushion the economy along the bumpy road ahead? monetary policy is aimed to ensure price stability so that the economy can continue to expand at its full potential. the definition of price stability that the monetary policy committee uses is in alignment with that of the public ; that is, we want to see low and stable inflation over time. at the moment, when our policy interest rate is the lowest in the region, monetary policy continues to be supportive of domestic demand growth. in the periods ahead, the challenge to monetary policy is likely to come from increased price pressure. with regard to our exchange rate policy, the bank

caleb m fundanga : recent significant developments in the zambian economy speech by dr caleb m fundanga, governor of the bank of zambia, at the 2006 business and financial writers, media awards, lusaka, 24 january 2007. * * * • heads of diplomatic missions, permanent secretaries and senior government officials • heads of economic, financial and business organizations • heads of media institutions • economic, business and financial writers • the acca international assembly member and the branch president • acca country manager • distinguished invited guests, ladies and gentlemen i am delighted both as governor of the bank of zambia and as patron of the business and financial writers forum, to officiate at the 5th annual business and financial writers awards ceremony for the second consecutive time. i must say i am always delighted to interact with you my colleagues from the media because we are both stakeholders in the provision and dissemination of financial and economic information to the public. the purpose of this annual event is to recognise outstanding journalism effort demonstrated by economic, financial and business writers from various media institutions. in this room tonight are different organizations represented with a commonality, that is, we all wish to have accurate, timely, informative, creative, relevant and in - depth information. distinguished ladies and gentlemen, i am pleased as patron of the business and financial writer forum to continue working with you. i would like to begin my presentation this evening by sharing with you some of the recent significant developments in our economy : 1. positive and significant real gdp growth rates over the last 7 years. 2. continuous and significant drop in overall annual inflation rate to levels below 10 %. as at end 2006, overall annual inflation was 8. 2 % compared with 15. 9 % at end 2005. but i must hasten to add here that the impact of increases in petroleum products and anticipated millers upward adjustment of maize prices in line with fra maize prices pose significant threats to overall inflation. 3. a fall in commercial banks lending interest rates. in line with falling inflation and yield rates on government securities, the average commercial bank lending rate declined to 27. 8 % in december 2006 from 33. 9 % in december 2005. although the trend is in the right direction, the bank of zambia considers the levels of lending rates to be still too high and i urge commercial banks to reduce their lending rates further to stimulate growth. 4. in 2006, the exchange rate recorded depreciation. against the us dollar, the kwacha depreciated by 21. 1