Domestic private savings in 2006 has now been projected to increase to 19.4 as a percentage of GDP. National savings are also projected to increase, resulting from increased savings by non-resident Sri Lankans as evidenced by the high growth in migrant worker remittances. The Investment to GDP ratio is also expected to improve from 26.5 per cent in 2005 to 29.0 per cent in 2006, and Private sector investment, which accounts for about 87 per cent of total investment, is estimated to increase by 31.4 per cent. Public sector investment too is projected to rise by 7.5 per cent as a result of growing construction activity in highways, roads, infrastructure facilities, community development projects, and tsunami related reconstruction and rehabilitation projects. The performance in the External sector improved with the continued expansion in international trade and growing global demand. During the first ten months of 2006, exports grew by 6.5 per cent and Imports by 15.8 per cent with a higher growth in intermediate and investment goods. The outlay for petroleum imports increased by 29.6 per cent during this period due to the soaring oil prices. For the year as a whole, export growth is projected at 7 per cent and import growth at 15.4 per cent. An aspect of the economy which caused some concern in the year was that the trade deficit widened to US dollars 2,955 million. As the result, the Current Account also recorded a deficit of US dollars 1,038 million in the first nine months of 2006.

This has led to its proliferation through multiple layers of leveraging and disproportionate distribution, in turn, which could result in higher systemic risks, thus, increasing the potential for instability in the financial system. In addition, transparency represents a basic tenet underlying all Islamic financial transactions. There is an inherent obligation on Islamic financial services providers to meet the appropriate standards of transparency. It is from the profit-sharing feature of Islamic financial transactions that imposes a high level of disclosure in the financial contract. The accountabilities of the respective parties involved in the transaction are clearly defined in the contract. This transparency also provides a strong incentive for Islamic financial institutions to appropriately manage risks. This disclosure allows the market to assign the appropriate risk premiums to the respective companies and thus the potential for the enhanced role of market discipline to take effect. These inherent features as required by the Shariah injunctions provides inbuilt checks and balances which serves to ensure financial stability in the Islamic financial system. These features are also reinforced by the development of a comprehensive regulatory and supervisory regime which has been strengthened considerably with the establishment of the Islamic Financial Services Board in 2002. It's establishment has also contributed to the harmonisation in the development of Islamic finance across different jurisdictions. Finally, education institutions have been established to develop the supply of professional talent and expertise in Islamic finance to support the growth and development of Islamic finance going forward.