During the year under review the South African authorities made considerable progress towards achieving their main policy objectives, namely to strengthen the balance of payments and to reduce the rate of inflation. By pursuing a restrictive monetary and fiscal policy, the authorities succeeded in reducing the rate of increase in domestic expenditure, as a result of which imports also declined. The lower imports, together with a sharp increase in exports, a rise in the price of gold towards the end of 1976 and a lower rate of increase in import prices than in export prices, led to a dramatic improvement of the current account of the balance of payments. The current account actually changed from a large deficit at the beginning of the year under review to a substantial surplus in the second quarter of 1977. Similarly, the basic balance switched into a surplus. Regarding the policy aim to reduce the rate of inflation, the rates of increase in consumer and wholesale prices declined further in the course of the year under review, notwithstanding the price-raising effect of an increase in indirect taxes and in a number of government- administered prices. Although the rate of inflation remained high in relation to that of most industrial countries, South Africa is one of the few countries in which the rate of price increases has been declining during recent months.