Address by Dr Chris Stals, Governor of the South African Reserve Bank, at a Conference of The South African Issuers and Investors Forum, Johannesburg.1. Introduction Discussions on risk exposures in the international capital markets generally concentrate on the risks involved for cross-border investors or lenders of funds. It is true that a lender that has lost money because of default by a borrower will remember the event much longer than the borrower -- creditors have better memories than debtors. It is also true that international lenders and investors looking for investment opportunities have many alternatives and must therefore consider the available options with prudence - - hence their need for searching analyses on risk exposures. Borrowing countries, however, also have to take account of certain risk exposures, some of which can be controlled or influenced by themselves, but others over which they have little control. It is essential that borrowing countries, and particularly Ministers of Finance and Governors of central banks from such countries, shall be aware of the many risks involved in international borrowing. The same lenders who at some stage may be queuing up to extend loans to a country can very easily afterwards turn around and pull the carpet from under it. As many a developing country experienced in the past, disrupting capital outflows at an inopportune time can do irreparable harm to an economy and create many hardships within the country. Central banks unavoidably are intimately involved in every international financial crisis experienced by their countries. Their task of maintaining overall financial stability often becomes impossible in such situations. Central bankers therefore have a vested interest in advising their governments against entering into international financial arrangements that will make the country inordinately vulnerable to sudden foreign capital withdrawals and against the implementation of domestic macro-economic policies that could easily lead the country into an external financial crisis. This responsibility becomes proportionately greater as a country's international indebtedness increases. 2. The nature of the financial risk exposures for borrowing countries South Africa is now gradually entering the international money and capital markets again as a borrower of foreign funds. From the macro-economic point of view, it is important for South Africa to have access to external funds. Domestic saving, which has declined to only about 17 per cent of gross domestic product last year, is not sufficient to sustain an acceptable minimum rate of economic growth that will provide in the many pent-up needs of the population. Unless domestic saving can be increased dramatically, a rate of growth in excess of three per cent per year will only be sustainable in the longer run if domestic saving can be supplemented on a continuous basis with a net inflow of foreign funds. South Africa must also maintain a net inflow of capital to provide in the foreign exchange needs of the country. With a relatively high import penetration ratio (total imports as a percentage of total gross domestic expenditure) and also a very high marginal propensity to import (the increase in imports as a percentage of any given rise in gross domestic expenditure), total imports of goods and services will normally exceed total exports of goods and services in times of rapid economic growth. Taking account of the current relatively low level of the official gold and foreign exchange reserves, South Africa cannot with its limited own reserves, sustain a current account balance of payments deficit, and therefore economic growth at a reasonable level, for any lengthy period of time.Now that foreign money and capital markets are becoming easier accessible again, South Africa has an opportunity of increasing its economic growth rate to a level that will not only provide jobs for the annual addition to the labour force, but also absorb on a gradual basis the huge backlog of unemployed people. The country must, however, han