malta is still one of the eu member states with the highest levels of general government deficit and debt expressed as percentages of gdp. the government plans to satisfy the maastricht criteria for fiscal performance by 2006, but this means that the short - term effects on gdp growth of this fiscal adjustment will continue to be felt at least until then. sound public finances are also critical to the role played by the central bank of malta in the economy. through its monetary policy, the bank remains committed to safeguarding the exchange rate peg against possible threats to the external reserves, whether they arise from changes in the international trading or financial environment, or from a lack of competitiveness, which adversely affects the balance of payments. this commitment has now taken on an added dimension with malta ’ s participation in the erm ii. as you are no doubt aware, in order to retain the same stability and benefits of a fixed exchange rate regime enjoyed over the past three decades, we have decided to maintain the eur / mtl rate unchanged during the erm ii phase at the central parity level of 0. 429300. the bank ’ s recommendation to the government was, however, premised on the assumption that fiscal consolidation is assiduously pursued and that a steady pace of structural reform is maintained. this cursory review of the recent performance of the maltese economy suggests that it was not sufficiently well prepared to exploit the opportunities that became available upon accession to the eu, so that the costs of adjustment are for the time being outweighing the positive effects. in this context it is important to note that these opportunities are now also available to the other nine new member states, so that the benefits of membership cannot be taken for granted. on a macro level, success in this endeavour will depend on the overall competitiveness of the economy ; and, on a micro level, on the efficiency with which the country ’ s resources are utilised and on the ability of the business community to identify profitable opportunities and exploit them in the new operating environment. it is to these issues that i next turn my attention. policy orientations for growth there are no easy or short - cut solutions to promote economic growth in malta. measures aimed at stimulating demand, through fiscal or monetary expansion, can only be effective in the short term. and in any case, their impact is limited. this is because they do not help to expand the economy ’ s supply capabilities, which is a prerequisite for sustained growth. in

, showing how barbados fared in the wealthiest regions, compared with those less affluent. that year the bank also published an analysis of the impact of fiscal policy on the demand and supply of foreign exchange, reaching the conclusion that fiscal outcomes in barbados have been sustainable ever since the mid - 1990s. the caribbean centre for money and finance has just launched a regional study of fiscal sustainability, which will adopt the approach used for barbados in this study, in assessing fiscal policies throughout the region. in the paper “ international business and financial services centres in the caribbean, ” published in june 2011, the authors showed that the international business and financial services ( ibfs ) industry in the caribbean, though miniscule as a proportion of global financial markets, is the principal avenue for diversifying foreign exchange earnings for many caribbean countries. in the smaller countries it is a major contributor to gross domestic product ( gdp ), government revenues and employment. in march 2011 central bank published “ an analysis of barbadian student enrollment at uwi cave hill, and the cost to the barbadian government ”, showing that cost savings of $ 25, 000 – $ 44, 000 per student could be realised by providing strong incentives for students to complete standard university entry requirements at the barbados community college, instead of doing a preliminary year at uwi. bis central bankers ’ speeches “ a review of the vat system in barbados ”, a paper published last december, will be the subject of a panel discussion in this seminar. the study found that the proportion of indirect taxes in total revenue remained unchanged after the introduction of the vat in the mid1990s ; the yield of the vat relative to the rate of tax was no higher than for the consumption tax in the period prior to its introduction ; the costs of administering the vat and customs duties were about the same, relative to their yields, before and after the introduction of the vat ; and the consumption taxes that preceded the vat were more buoyant in response to changes in income. also published last december was a paper entitled “ import substitution : how practical is it in barbados ”, which concluded that apart from energy there are not many items that can be replaced by locally - produced products due to issues of market size and price competitiveness. the examples i have given are all typical of the research i find most rewarding. as economists we all need to do research of a more technical and academic kind, but it should always be in search of insights that we can