It is argued that it is paradoxical for a developing country to have a current and capital account surplus, and thereby add to its reserves, rather than use foreign savings to enhance the rate of investment in the economy. In principle, this point is valid.
Despite the downside risks the Reserve Bank’s twin objectives of low inflation and a comfortable level of foreign reserves presently remain intact. Inflation fell to 1.5 percent in December then blipped upwards to 3.2 percent in January following Cyclone Evan. Our endyear expectation is around 3 percent.