One form of exchange rate target familiar to Icelanders is a declared target of an exchange rate index with a defined fluctuation band. Such an arrangement prevailed in Iceland before the inflation target and floating exchange rate were adopted in March 2001 (see Chapter 12). The original fluctuation band was rather narrow, at ±2½%. It was then widened to ±6%, and again to ±9%, after it proved more difficult, and in some ways riskier, to hold the exchange rate within a narrow band once restrictions on capital movements were lifted. But it was also  6  BIS central bankers’ speeches  growing imbalances in the domestic economy that contributed to the demise of the exchange rate target. Those imbalances were due in part to excessively accommodative demand management, which provided insufficient support for the exchange rate policy. An exchange rate peg of this type has an advantage in that, in the long run, inflation will tend to converge on inflation in the anchor currency area and exchange rate volatility will be reduced. However, Iceland’s experience in this area – and that of many other countries – shows that it is difficult to maintain such a unilateral exchange rate peg when movement of capital is unrestricted and the exchange rate policy receives inadequate support from fiscal policy and other aspects of demand management (see Chapter 18). Thus it is not a given that this would be a viable option for Icelanders, as such a policy might lack credibility because of previous experience.
We all are aware from our own history that some kind of instrument and mechanism has always existed to  BIS Review 36/2007  1  facilitate trade and other endeavours. What is abundantly clear, however, is that given the increased mobility of the citizens within the respective SADC member countries between cities and rural areas and at times between member countries, the need for payment instruments and the attendant mechanisms to facilitate safe and efficient remittances is arguably the relatively newer phenomenon. It is therefore the expectation of the Bank of Zambia that the 2007 SADC Payment Systems Regional Conference will discuss some of the most important trends and other strategic priorities confronting banks, payment system businesses, merchants and other service providers involved in the delivery channel for payment and other financial services. This is imperative as it would facilitate the drawing up of a development agenda of future priorities and contextualise the future of payment system oversight. Ladies and Gentlemen, since the establishment of the CCBG a decade ago, methods of effecting payments and other financial transactions have quickly become sophisticated with a trend towards execution in real time electronic media. All this is taking place because consumer confidence is growing in these instruments and mechanisms, which have been supported by growing confidence in SADC member countries’ economies in general and stability of the national financial systems in particular.