Such transparency and accountability is likely to enhance the credibility of the Central Bank and well anchor inflation expectations, resulting in increased economic stability and supporting high economic growth and increased international competitiveness of Sri Lanka. Meanwhile continued commitment by the government towards greater fiscal discipline and stronger fiscal position remains key to the successful adoption of flexible inflation targeting. Therefore, the Central Bank will continue to support government’s efforts to reduce the debt to GDP ratio to 70 per cent by 2020 and 22  curtail budget deficits at 3.5 per cent of GDP from 2020. The government’s intention to strengthen the Fiscal Management (Responsibility) Act is very encouraging in this regard. In conclusion, I would like to take you back to the beginning of Central Banking in Sri Lanka. In 1949, John Exter, the founder of the Central Bank of Sri Lanka, in his “Report on the Establishment of a Central Bank for Ceylon” stated as follows: “The decision of the government of Ceylon to establish a central bank was a decision with far reaching implications for the people of Ceylon. One implication already stands out very clearly: in taking steps to establish an independent monetary system to be administered by a central bank the government has demonstrated unmistakably its intention to achieve genuine economic freedom as a corollary of the political freedom achieved a year and a half ago.
The Central Bank also introduced a Monetary Policy Consultative Committee (MPCC) comprising academics, professionals and private sector representatives, enabling the Central Bank to obtain views of the private sector to be used in the monetary policy formulation process. In addition, the Central Bank started to enunciate its monetary  13  and financial policies for a medium-term horizon though a Road Map, which was unveiled at the beginning of each year. 105 Consecutive Months of Single Digit Inflation In spite of these modifications to the framework of conducting monetary policy over time, Sri Lanka continued to suffer from double digit inflation until 2009 as a combined outcome of high budget deficits and loose fiscal policy, reactive rather than proactive monetary policy, frequent domestic supply disruptions and international commodity price shocks. In June 2008, inflation increased to 28.2 per cent, the highest level of inflation since 1980s. In order to manage this situation within the monetary targeting framework, the Central Bank used strict quantitative monetary targets with increased policy interest rates while also imposing restrictions on access to the Central Bank reverse repurchase facility. In a display of validity of monetary targeting, the Central Bank was able to bring down inflation from the peak to near zero levels within a 12-month period. It was the sharpest disinflation the country has experienced in the history of Sri Lanka, but it must also be noted that the weak global commodity prices also contributed to this decline to some extent.