groups with ulterior motives to exploit farmer sentimentalities and calling for government intervention to protect farmer interests at the cost of tax payers. the heaviest economic cost of wide price fluctuations is the inability to discover future price developments and plan out the future production accordingly. in developed countries, the issue has been solved to a great extent by the development of forward and futures markets for commodities. when both producers and buyers participate in futures transactions, both parties, having assessed the market information available to them, lock themselves in prices that would fairly rule the market in the future. hence, the absence of a forward sale mechanism in a formal form in sri lanka was considered a serious setback to stabilise the incomes of farmers and thereby ensure socio - economic security. in view of this deficiency, the central bank stepped in 1998 to introduce a forward sale contract system to ensure an agreed price for the major agricultural crops produced by the farmer community. the enforcement of the forward contracts was done in terms of the provisions of sale of goods ordinance enacted during the british period. in terms of this law, people could get into sales contracts and violation of the contract by either party was considered an offence which would permit the aggrieved party to seek redress through courts of law. while the central bank provided the guidelines and the mechanism of the system by connecting the farmers to the would - be buyers of products, commercial and development banks functioned as facilitators, financiers and guarantors of the contracts. initially, the major crops such as paddy, corn, onion, ginger and sesame were brought under the system. the success of the scheme could be gauged from the very negligible incidence of violating the contracts by either the farmers or the buyers during this whole period 27. the system of forward sale contracts has led to the improvement of the quality of products as well. since the buyers stipulated the quality specifications in the contract itself, the farmers had to change their production methods to meet the required quality standards. this change has specifically occurred in the case of producing paddy for seed paddy purposes and corn for producing nutritious pre - natal food requirement of pregnant mothers. in addition, the system provided a market guaranteed price to both buyers and producers enabling them to plan their cash flows properly. it also helped both parties to raise loans from banks for both working capital and investment capital purposes. the future sustainability of the forward sale contract system will depend on the establishment of proper futures market for commodities in sri lanka. it

time, we must not forget that the depreciation of the dollar has occurred from levels that were generally deemed much too high, and that a change in the dollar exchange rate is likely to be a precondition for resolving the problem of the high us current account deficits in the long term. there has also been some new data on the real economy. as regards the us, the data suggest that economic growth there last year - once again - may have to be revised up. for example, housing construction reached record highs in october and november. in addition, consumption growth was stronger than expected during the same period. one reason for this was that households chose to save a smaller proportion of their income than expected. a pattern can be discerned here ; on several occasions before we have underestimated us consumer demand, in spite of rather optimistic forecasts. thus, there may be reason to revise down the forecast of households ’ saving ratio in the coming years, which if so would point to higher consumption growth. the increasingly weak dollar and stronger euro should also boost us exports, particularly in europe. in the short term, there is really only one serious concern in the us economy : that employment growth continues to be weak. this could create uncertainty among households and contribute to subduing consumption. but it is hard to believe that it would derail the current upswing. also with regard to europe, we began to see signs of somewhat more robust growth and greater optimism at the end of last year. in our assessment in december, we forecast a rise in growth in the years ahead. new data received since december broadly supports this assessment. business tendency surveys for manufacturing indicate that optimism has continued to increase while industrial production has now begun to rise slowly, although for the euro area as a whole the picture is still not as unambiguous as in the us. the strong performance of the euro could also result in higher imports and lower exports than expected, which of course would have an impact on demand in the economy and growth. to sum up, as i see it there is no reason to change the main features of the assessment we presented in december regarding international economic activity and price developments. it could perhaps be argued that the upswing in europe may be somewhat weaker as a result of the stronger euro, whereas the opposite may prove to be the case in the us. therefore, there is neither any strong reasons to change our view of swedish export market growth compared with december. in the period