business and investment environment in serbia is favourable is evidenced also by the continuing high inflow of foreign direct investment, which this year again will more than suffice to cover the current account deficit. i am particularly pleased to be able to say today that as of recent there are housing loans in dinars in the serbian market, offered at the interest rate of below 5 % and a repayment term of up to 30 years. this means that there is confidence that the stable macroeconomic environment will be maintained over the long - term horizon. the key message i would like to leave with you today is that inflation in serbia is low and stable and that it will remain so in the period ahead. let me remind you once again that, as of 2017, the inflation target will be one percentage point lower than the target since end - 2012. this shows that convergence to the eu in the financial sector has already been fully achieved. thank you for your attention. i will now give the floor to my colleagues who will give a presentation of the key messages from the inflation report.

to defend the exchange rate of the rand by providing large amounts of foreign exchange from the official foreign reserves. at the time of the dramatic decline in the net capital inflow in february 1996, the reserve bank held about r15 billion in official foreign reserves, while the private banking sector held an additional amount of about r4 billion in liquid foreign assets. the total of r19 billion was the equivalent of about 8 weeks ’ imports. taking account of the growing deficit in the current account of the balance of payments, the bank could only make limited amounts of foreign exchange available to ensure that no serious shortage of liquidity would develop that could create a panic on its own. the longer - term objectives of building up the foreign reserves to a more comfortable level, of reducing the role of the reserve bank in the forward foreign exchange market, and of phasing out the remaining foreign exchange controls were temporarily forced on the backburner, whilst monetary policy had to be directed more decisively towards an adjustment programme that would gradually restore stability in the market for foreign exchange. 3. the monetary policy adjustment programme three basic deficiencies in the underlying economic fundamentals were identified at the time that contributed to the lack of confidence in the south african economy, and in the ability of the south african authorities to restore stability in the market for foreign exchange. firstly, the growing deficit in the current account of the balance of payments had to be reversed, particularly after it became evident that the country could not rely on a permanent and sustainable large capital inflow from the rest of the world to cover an everincreasing current deficit. secondly, the imminent danger of escalating inflation, particularly after some depreciation in the exchange rate of the rand, had to be avoided. there was a real and perceived danger that south africa was destined for a new vicious circle of depreciation - inflationdepreciation that would unavoidably lead to a further erosion of the country ’ s competitive position in the world markets. thirdly, the escalating growth rates in the domestic monetary aggregates, such as the money supply and bank credit extension, had to be reversed. by accommodating the new inflationary pressures emanating from the depreciation of the rand on a continuous basis, monetary policy would obviously aggravate the situation. with only limited means at its disposal to finance the external deficit, south africa had no alternative but to adjust the disequilibrium, mainly by reducing or eliminating