’ s transition to its current monetary policy framework the macroeconomic institutional and policy framework of chile has been transformed radically in the last 25 years, from one that made stabilization an exceptional result to one that has facilitated achieving price stability. chile ’ s current macroeconomic framework is based on four pillars : ( i ) an autonomous central bank with the explicit mandate of safeguarding stability of prices and payments ; ( ii ) a low public - debt to gdp ratio and a fiscal policy rule anchored to a structural fiscal surplus ; ( iii ) a robust financial system, with a dynamic, competitive, and well capitalized banking industry, appropriately regulated and supervised ; and ( iv ) a full - fledged inflation targeting monetary framework, complemented by a floating er regime. substantial progress was made in cbc autonomy since the 1980s, when autonomy was very weak, even at lower levels than in the average emerging economy. the granting of legal independence in 1989 through constitutional law, led to a much improved position in the international ranking of central bank autonomy. particularly economic independence of central banks – the freedom of taking policy decisions independently of political interference – places chile well above the average level of independence of both emerging and developed economies in 2003. chile has shown a responsible fiscal policy, which has contributed significantly to successful monetary policy. during the 1990s, the fiscal balance averaged a surplus of 1. 5 % of gdp. the above - mentioned structural fiscal surplus rule stabilizes government spending over time, by linking it explicitly to permanent government revenue. therefore fiscal dominance of monetary policy is ruled out in chile, as a result of central bank autonomy and chile ’ s sound fiscal policy. public debt has shown a substantial decline since the 1990s, as a result of prudent fiscal policy. the share of consolidated gross public debt has been reduced from 76 % of gdp in 1990 to 20 % of gdp in 2006, whereas the consolidated net public debt position turned from 34 % of gdp in 1990 to - 6 % in 2006 ( figure 3 ). the successful performance of the fiscal position has been enhanced by the fiscal balance rule applied since 2001 ( figure 4 ). chile ’ s good growth performance, complemented by a market - based incentive structure, appropriate regulation and sound supervision of the financial system, has resulted in a safe and sound financial system and deep capital markets. as a result of the major banking crisis that came with the deep 1982 - 1983 recession, the 1986 banking law enhanced regulation and supervision of the financial system. since then, the financial system has developed around

ajith nivard cabraal : sri lanka ’ s peace dividend and recipe for growth and stability presentation by mr ajith nivard cabraal, governor of the central bank of sri lanka, at the 25th anniversary convention of the association of professional bankers “ beyond growth – a formula for success ”, colombo, 8 october 2013. * * * president of the association of professional bankers, mr. aravinda perera. guest of honour and immediate past governor, reserve bank of india, dr. d. subbarao, deputy governors of the central bank, distinguished delegates at the 25thanniversary conference of the association of professional bankers, my dear friends. at the outset, i wish to thank the association of professional bankers for inviting me this evening to share a few thoughts on the occasion of their 25th anniversary conference. i am also delighted that a highly accomplished and eminent scholar who has held the esteemed offices of secretary to the ministry of finance of india and the governor of the reserve bank of india, dr. subbarao is here to deliver the keynote address, at this august conference. i am sure his scholarly inputs, spiced with his rich experiences would add immense value to the deliberations of your conference, and that such foundation would provide the most appropriate platform for the timely conference theme : “ beyond growth – a formula for success ”. knowing the high technical prowess, vast experience and wonderful oratorical skills of dr. subbarao, i do not think i need to offer any comment on the theme of the conference, since he would do ample justice to that topic. therefore, i shall merely concentrate on the subject area that the president of the apb invited me to dwell upon, namely “ sri lanka ’ s peace dividend and recipe for growth and stability ”. my dear friends, when any person looks around our country they will witness the massive and rapid infrastructure development taking place. they will also experience the phenomenal changes that have taken place, and are taking place in our economy. the past major drawback in our country and economy, namely, the terrorism conflict, is now over, and we have so far enjoyed about four and a half years of peace and tranquility. much has happened during that period, which really is the peace dividend, although sometimes we do not think of it on those terms. therefore, in order to set the background for my address, let me quickly reflect on some of these achievements. in the post -