macroeconomic management requires that the fiscal consolidation process be continued as required in the fiscal ( responsibility ) management act, to enhance public investment, attain a sustainable level of public debt, and reduce inflationary pressures. this has to be accompanied by the continuation of a monetary policy that would maintain price stability and avoid the emergence of inflationary pressures that are highly injurious, particularly to the most vulnerable groups in society. the central bank will continue to focus on this area. in addition, reforms in the financial sector need to be pursued vigorously to ensure a vibrant and stable financial environment that would be able to take advantage of the links to the international markets and support growth. the high international price of fuel is a major concern. competitiveness of the economy has to be improved through productivity and technological improvements, especially in the agriculture sector. the tsunami related relief, rehabilitation and reconstruction have to be accelerated to restore normalcy to economic activities throughout the country. finally, the economy has to be further diversified so that it is better able to withstand internal and external shocks. i have highlighted the main economic challenges that face sri lanka and the broad policy requirements. i hope that today ’ s discussions would shed further light on how to move forward with a coherent policy package that will have the broadest support in sri lanka, as well as from all other stakeholders and well wishers. thank you.

##acerbate, other types of risk such as market, liquidity, or credit risk in an unanticipated way that could pose a systemic risk, resulting in participants incurring significant losses. it may not stop there. payment and settlement related operational risks could filter into businesses of banks ’ clients, governments and the country ’ s international correspondents as well. this aspect of banking operations was ignored for many years and it is fairly recently that regulators and banks started addressing payment and settlement related operational risks. today ’ s consensus is that payments, clearing, and settlement systems must be safe, reliable, efficient, and secure, which are critical to financial system stability. that ’ s why most regulators, the central banks in particular, have become owners and operators of clearing and settlement systems. although the tendency is to outsource this function, many regulators at some stage or other have owned or operated these systems. 7. another technology related risk is the desire of banks to acquire the leading edge with propriety systems, stand alone systems and specific it systems. banks tend to hang onto this short - lived approach. individual systems are costly not only to banks themselves, but also to customers. the norms should be not attracting customers, but reducing their operational risks and reduction of transaction costs to customers. both are often forgotten or ignored by banks and continuous reminding has become a regulatory responsibility. despite moral suasion banks in many countries have not realized the gains of having common atm platforms, back - up sites, disaster recovery sites and sharing of costs. 8. it may also be necessary to for banks to recognize that different risks matter in different lines of businesses. a comparison of business unit economic capital requirement by risk type indicates that operational risk is highest in fund management, private banking, and in retail banking when compared to corporate banking, insurance business ( if banks are allowed to engage in ). the new operational risk element is expected to hit banks specializing in areas - such as custodian arrangements and asset management. the regulators should be mindful of high operational risks in these businesses and bring them to the attention of banks. 9. uncertainties, regulatory challenges in promoting banks in a lighter vein, operational risks can be categorized into two, i. e. man - made risks ( mistakes, faulty models, frauds, terrorism, wars etc., ) and god - made risks ( earthquakes, floods, tsunami disasters, electrical blackouts, telecom interruptions etc. ) some of these are well known