of rand pessimists. the bank may also build up or reduce its international reserves ; in recent years the emphasis has been on accumulating international reserves, which naturally has had some price consequences but did not signify the adoption of a target level for the exchange rate. when abundant amounts of foreign exchange are available in the market ( and the rand is comparatively strong ) it presents the bank with a good opportunity to buy more foreign 4 / 5 exchange from the market, since its holdings of gold and foreign exchange are on the low side. on balance the bank has increased its gross gold and foreign exchange reserves from us $ 8 billion at the end of 2003 to just below us $ 19 billion at present. conclusion despite some progress made in recent years, high levels of unemployment necessitate more ambitious steps to strengthen south africa's growth potential. the reserve bank is committed to containing inflation, thereby providing a launching pad for enhanced growth and development. but this is not a sufficient condition for economic success. enhanced infrastructural development, the implementation of education and training programmes which deliver the skills necessary for a modern economy, and careful land reform are but a handful of the key ingredients necessary for boosting economic performance. and, as with monetary policy, all of these elements need to be nurtured carefully as it takes a while before they bear fruit. they require total dedication and sustained attention to detail if they are to be successful. success is in our hands. 5 / 5

took place more than five years ago, and denmark ’ s fixed - exchange - rate policy today enjoys unique credibility in the market. the present central rate vis - a - vis the euro represents a conversion of the exchange rate between the d - mark and danish krone fixed in january 1987. why could we weather the storms despite all the arguments that the system is so vulnerable? the short reply is that we have taken great pains to follow the “ rules of the game ”. first, we have used monetary policy solely to stabilise the exchange rate - whether or not the necessary interest rate was appropriate in relation to the domestic economic situation. monetary policy has been earmarked for exchange - rate stabilisation. second, it is just as important that fiscal policy has “ come through ” - to use a modern expression. fiscal policy has been responsible for ensuring stable and credible macroeconomic development in the medium term. adjustments have been made primarily in connection with the annual finance acts. nevertheless, in isolated cases specific measures were required. the latest example is the whitsun package of economic measures in 1998. the other main point of criticism of fixed - exchange - rate regimes is that a flexible exchange rate is necessary to shield the economy from external shocks. the same argument is used against participation in a monetary union. the hypothesis is that a flexible exchange rate allows such external disruptions to be reflected in the exchange rate. following the ems crises at the beginning of the 1990s, a number of those countries which had to give in to speculative pressure chose to let their currencies float. this enabled them to use monetary policy - i. e. the interest rate - to stabilise domestic demand and thus inflation. a new inflation - management model was introduced in monetary policy, the so - called inflation targeting model. new zealand and canada had already applied this approach for some time. however, it was the bank of england and sveriges riksbank that primarily developed the principles of this policy in close cooperation with academia. central banks applying inflation targeting aim at influencing the economy by solely using the interest rate to keep inflation two years ahead within a defined interval, typically 2 or 2½ per cent plus / minus 1 per cent. the interest - rate decisions are taken by a committee based on economic projections, model calculations and personal assessments. the ecb has a clear objective of price stability which is interpreted as an inflation rate below but close to two per cent. the ecb ’ s interest - rate decision