A severe banking and currency crisis in late 2000 and early 2001 caused the collapse of the three-year exchangerate based stabilisation programme only 14 months after its launch. The crawling peg was abandoned and the currency floated on 22 February 2001. It immediately fell by about one-third, and ultimately by almost two-thirds, against both the dollar and the euro. A new programme was presented initially in May 2001 and was further elaborated and refined during the course of the year and into 2002. It gained IMF support, with a commitment of new funding in Autumn 2001, followed by a substantial disbursement in February 2002. The new programme represents a deeper attempt than previous ones to address the fundamental weaknesses in the economy. Hence, key structural reforms placed a strong focus on public sector reform, building a sound banking sector, and liberalising markets for private sector–led growth. Because of the large fiscal costs for the banking sector clean–up, and the resulting jump in the public debt stock, the fiscal targets were tightened. And with the need for a new nominal anchor, monetary policy was foreseen as evolving toward a regime of formal inflation targeting by an independent Central Bank...