Regarding The Squaring-Off Of The Oversold Foreign Exchange Forward Book And The Introduction Of A New Publication Format For The Monthly Report On Official Gold And Foreign Exchange Reserves  Welcome ladies and gentlemen and thank you for accepting the invitation to this briefing session.   This briefing session is aimed at addressing two very important issues. Firstly, to give you an update on the progress made to date in eliminating the oversold forward book, and secondly, to introduce a new format, on the basis of which the South African Reserve Bank (SARB) will release its monthly publication of official gold and foreign exchange reserves. The SARB will release its reserves figures in the new format as from this month (March 2004). FORWARD BOOK I have indicated on previous occasions that, with the conversion of the negative net open foreign currency position (NOFP) in May 2003 into a positive position, which has been growing since, one of the SARB’s key objectives going forward was to close out the oversold forward book. This historic milestone was achieved during February 2004. It may be helpful to provide some historic perspective to the forward book. The build-up of the forward book took place after the announcement of the foreign debt standstill in September 1985, at which time the country’s foreign debt amounted to some USD24 billion. At the time the SARB had an NOFP of some USD12 billion, implying that the country probably had an outstanding uncovered foreign exchange position totalling some USD10 billion (approximately USD2 billion represented debt of the government which was not covered forward). It is important to note that this was not a commitment of one institution, but many South Africans had foreign commitments at the time. It emerged after the debt standstill that there were government agencies and large corporations that had large foreign exchange exposures. The type of crisis that was experienced in 1997 and 1998 in Asia was in fact experienced by South Africa in the mid-eighties at the time of the debt standstill, albeit for different reasons, back. As a result of the government’s apartheid policies, the country had no access to the international capital markets at the time, including no access to borrowing from the IMF or other official agencies. With the Government unable to borrow foreign currency, the country could only use one mechanism to raise foreign capital: providing forward cover to the private sector to ensure their use of trade credits. Private sector and government corporations accessing trade credit abroad funded these needs. In addition, certain private sector and government corporations were able to raise trade credit for longer terms, e.g. for the purchase of items such as power generators or aircraft, but the Bank had to provide forward cover for those foreign currency exposures as well. The large forward book and the NOFP thus became a surrogate for what would have been IMF or other international capital market borrowing. Without the above-mentioned limitations, the exchange rate risks that the Government was carrying through the forward book might have been carried in a different format, which would have been better understood by the markets. It can thus be argued that the forward book, in a real way, was an intricate part of political developments in this country. In fact, it was a structural overhang from apartheid. The dual exchange rate mechanism, which was re-introduced in 1985, was abolished in 1995 implying that purchases and sales by non-residents of any assets in South Africa had since then been channeled through the unitary exchange rate. Foreign exchange flows emanating from such transactions therefore became available to be purchased by the SARB, influencing the NOFP. A large inflow from the purchase of bonds or shares by non-residents would make a difference to the net reserves, implying that the Bank could start reducing its forward book and NOFP. After the dual exchange rate was abolished in March 1995, there was significant excitement and the SARB was able to ma