The South African Reserve Bank has again successfully pursued its strategic objectives in the past financial year.The main objective of the Bank remains the pursuit of low and stable inflation. Consumer price inflation for metropolitan and urban areas, excluding mortgage interest cost (CPIX), has been inside the 3 to 6 per cent target range since September 2003. The Bank continuously monitors economic developments, to assess their impact on inflation. Owing to the success achieved in the containment of inflation and with benign forecasts of future inflation, it was possible to decrease the repurchase rate by 50 basis points in August 2004 and again April 2005. The official policy rate is currently at 7 per cent per annum, its lowest level since the 1970s. Over the last year inflation expectations have decreased significantly, which will assist in making the lower levels of inflation sustainable in the future. With a view to increasing the official foreign reserves the Bank continued to purchase moderate amounts of foreign exchange from the market as and when circumstances allow. Consequently gross foreign reserves increased from US$9964 million at the end of March 2004 to US$15858 million at the end of March 2005. Over the same period the international liquidity position improved from US$6375 million to US$12381 million. The foreign exchange reserves are prudently managed both internally and by external fund managers. A significant milestone was reached in December 2004 when the rand was included in the currencies that are settled through the Continuous Linked Settlement System (CLS). The rand is now positioned as one of 15 international currencies settling through the CLS. The Bank remains committed to providing a regulatory environment that is focused on international best practice. A key focus area is the preparation for the implementation of an enhanced system of risk management and capital requirements, or Basel II. During the year the Bank was also involved in implementing the Financial Intelligence Centre Act which is aimed at preventing banks from being used as vehicles for money laundering. As a contribution to the wider interest in financial stability, the Bank publishes the Financial Stability Review, a bi-annual publication communicating the Bank’s overall assessment of the soundness of the financial system. It remains a focus for the Bank to ensure public confidence in the South African currency. Hence a new bi-metal R5 coin was introduced in August 2004 in response to the counterfeiting threat of the silver-coloured R5 coin. The Bank also introduced a series of upgraded banknotes in February 2005. The Bank plays an active role in the SADC region, on the African continent and in the global arena. It participates in a range of important regional and international initiatives including bank supervision and financial stability projects. In promoting economic cooperation in Africa, the Bank also provides expertise and infrastructure assistance to other central banks. The SARB College co-operates with regional and international training institutions and provides training to the Bank’s own staff as well as other African central banks. The Bank continued to work towards attaining its employment equity and gender targets in its staff complement of just over 2000 people. Its equity representation has again improved, also at management levels. Improvements have also been made on gender representation at various levels of seniority. This will remain a key focus area in the new financial year. In terms of its corporate social responsibility, the bulk of the Bank’s donations went to educational institutions during the financial year. The Bank’s total balance sheet increased from R108 billion at the end of March 2004 to R128 billion at the end of March 2005. This was mainly as a result of the accumulation of gold and foreign exchange reserves mentioned earlier. The increase in official foreign reserves necessitated various transactions to drain liquidity from the domestic money market, adding to the Bank’s interest costs.