Monetary policy statement.

THE State Bank's recent monetary policy statement, and its attendant action of hiking the key discount rate by a quarter per cent, provides a cleverly nuanced insight into the state of the economy at the present moment. This is the halfway mark of the new government's first fiscal year, the crucial period when it has to capture the imagination of the public, establish its credibility in the eyes of its creditors and stakeholders in the economy, push through tough decisions and set a direction for economic and institutional reform. This is not an exhaustive list of course, because accompanying the list of expectations on the economic front, the government also has to set the tone in the political space and build its relationship with the other tiers of the state. In short, the moment has a big agenda, and given the serious economic pressures that the government inherited, there is also an added sense of urgency to find its footing and get on with the task of running the affairs of state.

So on this halfway point, what does the State Bank tell us about how the economy is faring? It rightly points out that there are 'visible signs of deceleration in domestic demand', the crucial plank upon which the government's economic policy must be built, given the growing deficits on the fiscal and external accounts. It also rightly points out that this deceleration owes itself to 'stabilisation measures implemented during the last twelve months', meaning if the government inherited an economy...