multilateral organisations, resulting in the european integration project being put to a rather severe test. the two circumstances can present very different sets of challenges and could impact the sadc integration project in different ways, in that each could impact a different set of roleplayers. the emergence of measures to address issues that led to the global banking crisis has a direct impact on commercial banks, and on regulators who are required to refine existing or introduce new regulatory and supervisory measures. the events in europe, which revealed that, while there are no doubts about the benefits of monetary unions, under certain circumstances they can put serious constraints on countries, on the other hand may harbour even broader implications. countries in the sadc region will probably carefully monitor the situation in europe to reassess the admittance criteria and control measures for a future sadc monetary union. bis central bankers ’ speeches commercial banks will be required to conform to more stringent regulatory requirements because of the new measures introduced following the banking crises. regulators are required to review their oversight and supervisory procedures of commercial banks. a higher level of co - operation between regulatory bodies is becoming essential to ensure that different facets of a commercial bank ’ s structure and operation are adequately examined. joint oversight and mutual co - operation initiatives between regulators are being formalised by memoranda of understanding and we are observing the formalisation of roles of the different regulators in integrated environments. the significant commitment required of commercial banks to meet the new requirements could result in a shift in focus away from regional initiatives. regional initiatives could take lesser priority for the banks. the role of the sadc banking association becomes even more crucial in the effort to integrate the payment system environment. commercial banks, despite their commitments to effect changes to meet new regulatory requirements, should continue to play their part in making the regional integration initiative a success, not least because they stand to benefit from the opportunities that regional integration will bring with it. the sadc banking association is ideally positioned to work with the banking community, and a close working relationship with the project team is similarly of paramount importance. events of the recent past in europe have prompted sadc to examine more carefully the criteria for admittance to the monetary union. this together with the time being taken for the establishment of control measures and procedures, will more than likely delay the eventual establishment of the sadc central bank and the introduction of the sadc single currency. the dates initially contained in the regional indicative strategic development plan ( risdp ), which called for the

what is the ‘ ideal ’ rate of inflation then? ours is a small economy and highly open to international exchange and international economic and financial influences. as such it is quite inflation - prone. there is no such thing as an ‘ ideal ’ rate of inflation. the best policy outcome can only be price stability. taking into consideration the character of our economy, an inflation rate of 3 to below 5 per cent sustained over time is believed to be tolerable. a rate of inflation in this range may be kept in sight as an anchor for the monetary policy of the bank of mauritius. the sustained policy effort in the last few years underpinned by the absence of a consequential increase in wage bill in the economy helped bring down the rate of inflation. for the current fiscal year the rate of inflation is expected to be around 5 per cent. importantly, the pressure behind inflation appears to have lost some of its intensity. i wish to underscore that the problem of inflation would have been greater today had not the bank of mauritius progressively pursued a restrictive monetary policy stance in response to the intensified inflationary pressures following the rapid depreciation of the rupee in 1996, 1997 and 1998. beginning 1999 we pursued a policy of monetary tightening with a view to arresting the rapid depreciation of the rupee thereby stopping the flight of capital. had the depreciation of the rupee and the resulting flight of capital not been arrested the foreign exchange reserves of the bank would have dwindled to only a few weeks of imports. inflation rate would have eventually risen to double digits. seldom do we realize that with the least policy mistake in 1999 we would have subsequently knocked at the door of the imf for a stand - by arrangement. monetary tightening, that is, the high interest rate policy relentlessly pursued over time helped stabilize the foreign exchange market and also check monetary expansion to a rate consistent with the objective of reducing the rate of inflation. it is therefore a misconstrued view that the bank of mauritius is pursuing a high interest rate policy. this is not how i would like to put it. the bank is pursuing an inflation fighting policy. all of us know it well. savers do demand higher interest rates to protect themselves from higher inflation rates. a monetary policy stance that eventually brings about sustained low and stable inflation rate creates conditions for sustained low interest rates. we are all well aware that it is only in those countries that have a good track record of confidence in their money through