background paper has been prepared in consultation with the seacen centre. i hope the paper will be a useful document to initiate fruitful discussion on the issue of strategic planning for central banks. in addition, mr gavin bingham, head of international liaison, bank for international settlement, will present an overview of current issues and practices relating to this topic. i am confident that the participants would contribute with their country specific experiences on central bank governance and specifically on their experiences with the formulation and implementation of strategic plans in the respective central banks. the second session will cover selected central bank governance issues and will serve as a follow - up to the seacen - bis seminar on central bank governance conducted in langkawi, malaysia in february 2004. the discussion will specifically focus on aspects of central bank boards as well as lessons and conclusions drawn from the february seminar. ladies and gentlemen, i have no doubt that deliberations of this seminar will be of great benefit to all of us. i also hope your journey to sri lanka will give you a chance to see a little of our country and meet our people. we have arranged for you to see some places of interest in sri lanka. let me conclude by wishing you a productive seminar and pleasant stay in sri lanka. thank you. 2 / 2

economic performance. that caution flows from the existence of some unusual imbalances in the u. s. economy today. we are buying far more than we produce, and the extra purchases come from importing more than we export, financed by net borrowing from abroad. the resulting current account deficit has risen to a record level, in excess of 6 percent of gross domestic product. the counterpart of the current account deficit is low savings generated here at home ; in the past year, household saving out of current income fell to the unusually low level of about 1 percent. several factors have contributed to the willingness of households to spend most of their income, but an important one has been the rapid and continuing rise in housing prices, which has boosted household net worth. that rise in turn probably reflects several influences, one of which has been low long - term interest rates. these imbalances and unusual asset price configurations have persisted for some time. the current account deficit has grown steadily since the mid - 1990s ; household saving rates have been on a downward trajectory for even longer ; the low level of long - term interest rates and the rapid pace of house price increases have been the subject of much commentary for the past few years. these phenomena could well continue for some time longer, but they are not sustainable indefinitely. at some point, global investors will require higher expected rates of return as their portfolios become increasingly concentrated in dollar assets ; house price increases will encounter resistance as they rise relative to income and rents ; as housing prices level out, households will recognize that they must increase saving out of income to have adequate resources for retirement ; and the federal reserve already has been raising short - term interest rates as demand recovers from the shocks of recent years. i expect that the adjustment to more - sustainable patterns of spending and production and saving will occur in an orderly manner. the response of asset markets to changing attitudes and appetites will induce gradual adjustments in spending. but as you think about your risk - management challenges over coming years, you need to keep in mind that our economy is in unexplored territory in many respects. historic patterns of movements in interest rates, exchange rates, and house prices may not be very good guides to future relationships. who would have anticipated that the dollar would strengthen in 2001 as the federal reserve eased aggressively or that long - term interest rates would fall as we gradually reduced monetary accommodation over the past year? even orderly adjustments may involve new combinations of market developments. and the risk of rapid adjustments and