interaction with inflation has to do with fiscal effects on potential output. lower tax on productive capital or companies may lead to more companies being established and thereby raise potential output. similarly, lower tax on labour or increased educational inputs may generate an increased supply of labour and also influence wage formation. these are examples of the numerous ways in which changes in tax and expenditure systems are likely to modify economic opportunities and promote conditions for good growth without the attendant capacity shortages that generate price pressure. current fiscal policy the trade - off between monetary and fiscal policy — the policy mix, as we economists like to say — has improved considerably in the present decade. the rapid accumulation of government debt has ceased and the stock is now being reduced. while the consolidation of government finances has made the fiscal stance restrictive, it has been possible to lower interest rates and this in turn has stimulated investment, economic activity and employment lately. this is accordingly a considerable improvement compared with the early 1990s, for example, when factors such as very weak government finances led the riksbank to keep interest rates up at a time when government debt was rising markedly. government debt and budget balance per cent of gdp. 1999 and 2000 forecast government debt - 5 budget balance - 10 - 15 source : national institute of economic reasearch in the june inflation report we noted that as a result of measures proposed in the budget bill, during 1999 and possibly also in 2000 fiscal policy would probably be more restrictive than the riksbank had assumed earlier but would still become successively more expansionary. the restrictive economic effect of fiscal policy was accordingly judged to be less marked than in the period 1994 – 97. our scenario assumed, however, that there would be no further tax cuts next year. we foresee a government financial surplus somewhat above 2 per cent of gdp but have thus assumed that it will be used to repay government debt. in 2001, on the other hand, we assume that any surplus in excess of 2 per cent of gdp will be transferred to households. the swedish debate about tax cuts and increased spending has become more intense as the government budget moved out of the red and is expected to show continued and growing surpluses in the years ahead. that is hardly surprising. we had exactly the same debate in the 1980s as soon as the budget deficits had been eliminated. some comments are therefore called for. one comment concerns the formulation of the budget target. a medium - term average implies that in good years the surplus should be above 2 per cent and by most standards the coming

be prone to technical exposure to unauthorized implementation or modification of data and program at either the network, platform, database or application level. a classic example of this type of controls is the use of user id and password. supervisor should be able to analyze and evaluate the effectiveness of both physical and logical access control in accomplishing financial institution's information security objectives. integrity supervisory objective an objective of it supervision in an integrity area is to ensure reliability and completeness of system functionality in order to verify that data is processed in an accurate and timely manner. supervisory areas therefore, supervisors need to review and assess whether financial institutions have sound application control in place. in this regard, they should have control built in the procedure and programmed in the system to ensure the integrity of input, process and output. in a large financial institution using various applications, a sample of applications including core banking applications and management information system ( mis ) would be examined for control adequacy. data and system integrity can reflect the effectiveness of system development, acquisition and change control procedure. therefore, it is necessary to cover those areas in the scope of supervision. availability supervisory objective an objective of it supervision in an availability area is to ensure financial institutions'readiness for being able to run business without interruption during an occurrence of disruption. supervisory areas in this regard, supervisor must review and assess the scope of business continuity plan which should be established in an enterprise - wide basis. also, the best way to determine how well the plan works or which portions of the plan need improvement is through testing. we encourage financial institutions to test the disaster recovery plan at least once a year. finally, financial institutions should have a procedure in place to update the plan regularly. 4. it examination and risk assessment objective the objective of it examination and risk assessment is to assess a financial institution's it management and operation to ensure accuracy and reliability of information system as well as its alignment with the financial institution's business objectives which can eventually bring in the safety and soundness. it examination process there are three main steps to be taken when performing it examination. 1. pre - examination this step is the process of gathering the information about the financial institution on which we will conduct examination. the information including business nature, objective, policy, plan, it infrastructure and organization chart can be obtained from previous examination reports, internal database and external sources. at this step, it examiners will coordinate with onsite examiners to share information and identify areas of concerns. with all of the