economic centers and the public has to be safeguarded from the terrorist attacks through the implementation of the necessary anti - terrorism initiatives. in that context, the governmental interventions to protect the interests of the country, and its economic infrastructure should be clearly recognised as a basic imperative in the overall defence as well as macroeconomic plan of the nation. the good news however is that despite this and other serious challenges, the country was able to maintain macroeconomic stability at a reasonable level. the balance of payments recorded a surplus ; the exchange rate, which in the years 2001 to 2004 had depreciated by approximately 5. 9 per cent per annum, depreciated by only 5. 2 per cent during 2006 ; a comfortable level of reserves was maintained ; government revenue and fiscal deficit targets were achieved as planned ; the outstanding government debt to gdp ratio declined ; investor confidence remained high ; a remarkable increase was seen in foreign direct investments ( fdi ) and for the first time, the yearly fdi exceeded us dollars 500 million ; foreign portfolio inflows into the stock market increased substantially ; the share indices recorded its highest ever levels ; the government was able to mobilise around us dollars 1. 2 billion in loans and grants from bilateral and multilateral donors and commercial sources. but we have to admit that not everything was rosy. there were a few down - sides and draw - backs too. inflation began to rise since april due to higher than expected monetary expansion, some revisions to administered prices and escalating vegetable prices. in response, a tight monetary policy stance was adopted to curtail high growth in monetary and credit aggregates and it is likely that such measures would lead to the moderation of the rising inflationary pressures, and reflect a downward trend from april 2007 onwards. chairman, your excellencies, friends, over the next few years, we are also very keen to deal with two key disparities prevailing in our country. these are : ( a ) regional disparity in economic development, and ( b ) significant income disparity between the poor and rich. creating more opportunities within the regions outside the western province and encouraging village development and human resource development at all levels, hopefully the need to reduce poverty significantly, and address income inequality. these efforts therefore would need to be pursued with renewed enthusiasm, as already vowed in the mahinda chinthana, the president ’ s development plan for the nation. we are also deeply conscious that for the country to achieve its macro - economic

goals, the monetary policy too should play a key role. towards that end, the monetary policy framework adopted by the central bank has been made consistent with the government ’ s macroeconomic framework. accordingly, the 2007 targets in the monetary programme of the central bank have been set, after taking into consideration the potential growth and liquidity needs of the economy to move along the projected growth path while keeping inflationary pressures in check. your excellency, in november 2006, the government of your excellency announced its medium - term macroeconomic framework within a 10 - year development framework. this programme targets an 8 per cent growth for the next six years and 9 - 10 per cent thereafter. these are tough targets. but these are achievable. when striving towards such goals, we must remember that our development focus should always be clear. we must also remember that our external environment may not always and necessarily be ideal. but we would do well to remember that ours has been and is a resilient economy. we have shown that we can grow even in the face of highly adverse circumstances and scenarios. in that context, we would be wise, if we do not develop our economic plans on the overriding assumption of a totally terrorism free environment. of course, if the peace process is successful and a early political solution is found to the on - going conflict, it would be highly desirable. but at the same time, if we consciously develop our plans and frameworks on less than perfect conditions, we could still find ways and means to succeed and deliver the planned results. we owe that to our people, who cannot and should not have to wait until everything falls in to place. therefore, our future strategies should be aimed at moving ahead even in the face of threats of terrorism and other adversities without setting out as a pre - condition, the achievement of a permanent peace or ideal conditions to embark on our development projects and programmes. we are also working today on the basis that all our strategies would be of no avail, if we are not sufficiently committed to achieving those plans. we know we are serious in our efforts. we also have to show we are serious. that is why, at the beginning of 2007, in close consultation with the secretary to the ministry of finance, the monetary board developed a comprehensive monitoring mechanism of key macroeconomic variables in the external, fiscal and monetary sectors. these are based on a financial programming framework to ensure that key macroeconomic targets are met as announced