development. what will the exchange rate do? under the floating exchange rate regime, the sri lankan currency can no longer be regarded as a steadily and continuously depreciating currency. with the maturing domestic foreign exchange market, the exchange rate is now more responsive to, and determined through, market forces of supply and demand, while the intervention by the central bank is limited to mitigate excessive volatility in the market and to build up official external reserves. the stabilization of the sri lanka rupee utmost underlines the need for the export and import competing sectors to focus more on productivity improvements and market access in order to maintain external competitiveness. instead of waiting for the exchange rate to depreciate and then for our businesses to become competitive, it is time for all of us to improve our productivity in whatever manner we can. the garment sector, i hear is trying to gain from higher productivity and also through cost efficiencies. how does inflation and productivity affect each other? increased productivity is an important prerequisite to achieve low and stable inflation levels in the long - run. the lower productivity allows cost increases that flow through to product prices and thereby raises inflation. therefore, the lower productivity growth thus represents a negative supply shock that generates inflationary pressures. in such context, it is necessary to pay due attention to improving the productivity in order to prevent potential inflationary pressure associated with high income arising from faster nominal growth and cost - push factors that raise the cost of production. the long run containment in inflation necessarily relies on containment of monetary expansion and increase in production in the country, particularly by improving productivity. as the central bank, what we can do? obviously we cannot produce goods or services for the consumption of the economy, but certainly we can create the right conducive environment enabling the country ’ s economic performance. why should the central bank be interested in productivity? our role is to maintain economic and price stability and financial system stability. we also provide necessary payments and settlement infrastructure. we advise the government in economic affairs and policy making, and we provide important agency services such as exchange control, public debt management, provident fund management and regional development activity. in all these functions, our mission is to “ contribute to sri lanka ’ s prosperity ”. at the same time, the central bank widely pronounces the theme of “ success through productivity ”. but, obviously this cannot be done by ourselves … the success through productivity needs a consolidated national effort. that is why

a family unit. both spouses have their personal interests, but work together for the well - being of the family unit. there are at times occasions where one spouse overrides the other. but, as a normal rule, the family unit moves forward without publicizing those internal family debates and sometimes family fights. this is the main lesson which exter has left for us in the twenty first century. that is, both the governor of the central bank and the secretary to the ministry of finance should know their rights and responsibilities well and act on an ethical platform in which they continue to appreciate the distinctive roles to be played by them for the well being of the country. john exter, in his wisdom, firmly believed that when laws fail, human beings working with moral consciousness could do wonders.