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We are running an eLearning site. The site is on unicode font (Sinhala language). We are planning to put Google Adwords image/banner ad to promote our site.

One of my friends said that we cannot put Google ad because our site is using unicode. He suggested we create an English version of our home page to put a Google ad.

Is this true? Is there another way to put Google ad?

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It doesn't matter whether you're using Unicode, but only whether Adsense supports your language. Looking at the list of supported languages Sinhala is not there, unfortunately, so you won't be able to use Adsense.

Update: sorry misread the question. However, for Adwords the policy appears to be the same. See Adwords supported languages and Language targeting overview in particular:

All advertisers must choose a language and location to target...

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but what if we are do the add in english? –  Kombuwa Nov 14 '11 at 11:11
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