Such reserves arise due to positive external shocks which can cause a surge in government revenues and, at times, could be challenging as some Governments may have to deal with an appreciating exchange rate, undermining export competitiveness with symptoms of "dutch disease".
This has the potential to enhance the credibility of the framework and strengthen market discipline. At the same time, as the reforms consider changes to well-established deposit insurance schemes, it is important to avoid unwanted side effects. Let me recap: Recent events have highlighted weaknesses in the banking sector during periods of monetary policy tightening.