the treasury highlighted the potential of our economy to achieve this target at the “ sri lanka economic summit ” held in august 2014. we know that this would require greater efforts in bis central bankers ’ speeches all fronts – the government, the central bank and the private sector – that would support the economy in the transition to drive through the middle income path towards the higher end of the upper middle income category. this new economic model should be able to overcome the rising “ economic gravity ”, which would otherwise pull the economy into the “ middle income trap ”. with the renewed acceleration in economic growth, we need to focus our attention on the next phase of economic development beyond 2016 and transforming the economy to achieve a sustained, inclusive and balanced growth. sri lanka ’ s drive beyond 2016 will largely depend on the strength and the dynamism of the financial sector. as we strive to reach these new milestones, our current macroeconomic indicators are bound to undergo a massive transformation. as a part of this transformation, the greater challenge would be to make sri lanka a popular, emerging financial centre in the region, where setting up a financial hub in sri lanka would be a key task. to strengthen and expand the dynamism, the financial sector will have to possess technology - leveraged financial services to improve operational efficiency while diversifying funding sources by tapping the international capital markets to mitigate risks and improve cost efficiency. further, expanding delivery channels and business networks beyond domestic territories, enabling them to grow and exploit opportunities while addressing external vulnerabilities and spillovers are also essential. meanwhile, a stronger capital base, a high quality pool of human capital and a high level of corporate governance to meet the enhanced regulatory framework are required in the financial system to steer the country towards attaining a sustained growth. to facilitate accomplishing this task, it was identified that the financial sector of the country has to be strengthened and stabilised further by implementing an appropriate set of policies in a timely manner. reason 2 : necessity of maintaining stability in the local financial system amidst the growing complexity in the global financial system ladies and gentlemen, we all accept that a stable financial system is a crucial element for a conducive business environment supportive of sustained economic growth. however, in the present day, central bankers and other policymakers around the world are confronted with a number of challenges in maintaining financial system stability due to the high contagion effect resulting from the increased complexity and connectivity in this hyper - connected world. although globalisation can allocate

in payment and settlement related activities who will attend to the preliminary work, such as stocktaking and identification of gaps in the national payment systems. there should be task forces on ( a ) policy and operational matters ; ( b ) legal and regulatory aspects ; ( c ) technical and institutional infrastructure ; and ( d ) communication and exchange of information. the task forces should make their recommendations to the spc, which will take considered decisions. in nominating members to the task forces, where possible, countries should select officers from their respective npcs, as such councils are expected to have representatives of all stakeholders with the necessary skills and expertise to handle work relating to the above areas. sri lanka has already established an npc with a clear mandate to take forward payment reforms across the nation. the npc has prepared a well - focused action plan after detailed deliberations with all stakeholders and is the apex body for payment system development policies and operations. i understand that india and some other countries too have npcs. it may also be important to set up a secretariat in one of the countries to lead the regional payment initiative. the spc, as well as the task forces, should establish close links with international organizations such as the wb, imf, bis and also with other regional payment groups and developed country central banks for guidance and technical assistance. as i mentioned before, the acu is the only regional clearing mechanism that exists today among saarc member countries. it needs a clear reform agenda to mitigate risks involved in that system and ensure safe payment flows among the member countries. already, a technical committee has been appointed under the chairmanship of sri lanka to look into some elements of modernizing the acu. the whole of yesterday we debated on some of the short - term measures that need to be introduced to the acu clearing arrangements in order to avoid any disruptions to cross border flows. that committee too could report its recommendations to the spc. there may be many other modifications, modernizations and reforms that need to be introduced at national and regional levels which will shape the annual work program of the saarc regional payment initiative. it is in that con text the topic “ working towards a saarc regional payments group ” was chosen as the theme for this conference. 8. conclusion we need not wait till the saarc region ’ s trade and investment flows rise significantly to modernize our payment systems. the saarc member central banks need to decide early to establish a regional payments