Together this implies that the interest rate spread charged and earned by banks has increased substantially in the last 15 years. Figure 5: Lending and Deposit Rates in Sub-Saharan Africa (w/o SA) 25 20 15 10 5 0 1993  1994  1995  1996  1997  1998  1999  Deposit Rate (median)  2000  2001  2002  2003  2004  2005  Lending Rate (median)  What can African central banks do to foster deeper and more efficient financial sectors? In most African countries, central banks are responsible for regulating and supervising banks. Here central banks should ensure that regulatory requirements are not prohibitive for new  BIS Review 110/2007  5  market entrants, particularly foreign financial institutions who may bring cheaper capital and new technology to the sector. Moreover, central banks can foster the development of sustainable microfinance and rural financial institutions to cater to the vast agricultural and microenterprise sector. They can do so by adopting regulatory requirements which suit the limited sphere of activity of these institutions. 5. Conclusion  Ladies and gentlemen, let me conclude these brief introductory remarks. How can we assess the contribution of central banks to improving the business environment in Africa? Most African central banks have been successful in reducing inflation. This enables the private sector to plan ahead and engage in contracts without worrying excessively that their proceeds may be eroded by rapidly rising inflation.
For example, episodes of volatile capital flows may return, while the economy’s long-term competitiveness remains in need of improvement. Policy objectives in 2011 The Bank of Thailand envisages two economic policy objectives this year: (1) to safeguard macroeconomic stability, and (2) to continue strengthening underlying fundamentals of the economy. Both objectives should be interpreted in the broad sense, for example, macroeconomic stability entails price stability, financial stability, as well as fiscal sustainability. Likewise, strong economic fundamentals encapsulate resilient private sector, efficient public sector, and sound banking sector among others. Given these broad goals, the Bank of Thailand and everyone all have parts to play. The government, for example, is in charge of ensuring a sustainable fiscal position in the long-term, and an efficient disbursement of budget so as to best strengthen the economy. Monetary policy Maintaining economic balance is key to the making of monetary policy, as it is one of the most important pre-requisites of macroeconomic stability. In practice, this means that as the economic activity returns to normalcy, monetary policy stance must similarly be normalized. Failure to do so will add undue pressure on inflation, ultimately posing risks to macroeconomic stability. Thus this year, the monetary policy committee (MPC) will need to continue normalizing monetary policy. The amount and pacing of policy interest rate adjustments this year will be consistent with the outlook for growth and inflation as well as the surrounding risks.