A responsive monetary policy and the beginning of fiscal consolidation have helped to improve macroeconomic balances during 2002 and in the course of 2003. The National Bank of Slovakia (NBS) has successfully pursued its disinflation objectives over the period under review and managed to avoid a sharp appreciation of the currency in the face of large-scale capital inflows. On the fiscal side, the overdue consolidation of public finances has started, and the very large deficit of 2002 is being reined in. Yet, the heavy burden of government guarantees and soft loans from earlier years limits the government’s ability to restructure its expenditures and to increase much-needed investments in human resource and physical infrastructure development and maintenance...