The Central Bank of Sri Lanka in a Press release dated 2005 December 23rd states I quote it is necessary to issue higher denomination currency corresponding to the increase in Gross Domestic Product (GDP) of the country.
First I assume CBSL at least meant to say GDP per capita since countries with larger population don't need larger denomination notes and the GDP needs to be at least normalized by the population of the country. Even if you take the per capita GDP, USA has a per Capita GDP which is over 10 times that of Sri Lanka even when normalized by the Purchasing Power Parity (PPP) of the currency in the local economy. The Highest denomination in USA is $100, and per capita GDP would imply Sri Lanka should be able to manage with a US$10 or Rs1000/- note. In USA even the $100, and $50 don't circulate much. The $20 is the highest in general circulation. If you give a $100 currency note in a grocery store the cashier has to take the note to the supervisor for approval of acceptance. So what is the justification of the Rs2000 note in Lanka.
The largest useful denomination really depends on is the size of largest cash transactions. In USA higher denomination currency notes are not needed because large transactions are most often done by personal check or credit card. In Lanka Cash is used a lot more since Credit Card penetration is not much, and personal checks are hardly accepted by any shop or restaurant. Cash is also probably used for many other reasons and as a consequence there is a need for the Rs2000/- note.
For reasons unknown to me Lankan government department prefers payment in cash. For example the immigration Department states that you can pay by Bank Draft or by cash. However, when I tried to pay a large sum by cashiers check since I didn't wish to carry that amount of cash in Rs1000/- notes they said my application would get delayed by 3 Weeks. The check needs to be sent to the head office for deposit, and they need to wait till they are informed back it has cleared. That day I clearly wished there was larger denomination notes so that I could easily count the cash I got from the bank counter.
Before the widespread development of the banking system and use of checks there was the need for currency notes of very large denomination to be able to inconspicuously transport large amount of cash to make payments. In fact the main reason for the invention of currency note few hundred years ago, was to avoided the need to transport gold and silver at the risk of being robbed. Till 1942 there was a Rs1000/- note which at that time was worth of order 80 gold sovereigns or a Million Rupees in Todays currency. There was even a Rs10,000/- note issued in 1947 for interbank transactions.
The efficient banking system has removed the need for very high denomination notes. The Rs100/- note was the largest denomination for a long time since the Central Bank of Ceylon was established in 1950, and was worth about 2.5 gold sovereigns early 1950's. With Electronic transfers for many transactions we are heading toward a coin and currency less society. However that is in the distant third world future.
The risk of forgery is the major drawback high denomination currency notes. With modern computer technology forgeries of the Rs1000 and Rs500 notes have been made which will go unnoticed by the public in a bundle of notes, although easily identified by closer inspection of the security features. It is the reason for the elaborate designs on currency notes.
Currency notes were issued with pictorial designs for the first time on 1941 February 1st. In the early 1940's a sovereign was worth about Rs13 while it is worth over Rs13,000 today. The one rupee currency note of that time is worth Rs1000/- in today's currency. It had an image of Elephant's Head with a mahout on the reverse matching that found on the front of the Rs1000/ note. The two rupee currency note had an image of the Sigiriya Rock. It is strongly rumored that the new Rs2000/- note which has been printed has Sigiriya on it to match the old series.
The headline of a Sinhala Sunday Tabloid stated that they had evidence the Central Bank has already minted 30 Million, Rs2000/- notes at a cost of about Rs 250 million, and arrived at the bank just few days before the presidential election.
There has been a change in the Finance Minister. The date and signatures are printed on the currency after the note is printed. Stocks are held without date and signature to printed when needed. Why they were printed in this occasion before the government decision was made to release the note is a mystery.
The Rs250 Million political question is if CBSL will destroy the current stock and reprint to replace Sarath Amunugama's signature with that of Mahinda Rajapakse.
Seems to me a waste if that was done, particularly since that exercise will cost almost half the Rs 600 Million claimed to have been made by changing the coins to lighter plated steel coins. Only time will tell.
However this would not be the first time stocks of unused currency was destroyed by the Central Bank. In 1964 1.2 Million Red color Rs 50/- notes dated 12th June, 1964 with the signature of N. M. Perera were not issued since they had not been released before the Greens won in March 1965. In 1970, these notes together with 4.6 Million Rs50/- and Rs100/- notes with an image of the statue of King Parakrama Bahu was destroyed without issue when all the older Rs 50 and Rs 100 notes were demonetized and replaced with notes with image or Late S.W.R.D. Bandaranaike, That costly effort was justified as being to remove from circulation Lanka currency illegally hoarded abroad. That turned out to be a futile exercise; an error in logistics or in bookkeeping.
The total coins and currency in circulation is governed by the GDP of a nation. Although it may politically sound better to indirectly justify the Rs2000 note by saying Lanka's GDP has grown from Rs 85 Billion in 1981 to over Rs 2000 Billion in 2004, a factor of 10 of that increase is pure inflation. On the gold standard the per capita GDP rose from about 3 sovereigns in 1981 to about 8 sovereigns in 2004.
| In 1852 the British Gold Sovereign was made legal tender in Ceylon and was the coin of largest denomination that was legal tender in the island. When the Rs1000/= note was reintroduced in 1981. that was then worth about a half a sovereign. So the main justification for the Rs2000/- note is the purchasing power of the currency as reflected by the Price of Gold. The largest denomination note needs to be about the price of half a gold sovereign now worth over Rs6000/-. Interestingly even a thousand years ago the largest denomination in Lanka was a Kahavanu made with about half a sovereign of gold. | 
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See Also Reasons behind issuing a 2,000 Rupee note: Another perspective By Harsha de Silva
Author maintains an educational website on two thousand years of Lankan coins at http://coins.lakdiva.org.lk/, and is a life member of the Sri Lanka Numismatic Society.