Serious situation: Monetary Board lacks experience and depth?

By Insider

Reading Dr. Wijewardana’s article this morning I realised one thing; the Monetary Board does not have the depth it must have to guide the economy. Starting from the Governor who has been fund manager most of his life has never faced trying times like what we have today. The rest of the board what are their credentials to be on the Monetary Board? Could the Central Bank tell the public what their credentials are to be on the Monetary Board?  

For example Crysantha Perera was Chairman of a tea company and a few years as a Non Executive Director of DFCC. Is that exposure sufficient to guide the economy in such turbulent times? Who are Jayatissa and Ramanathan? What basis were people like Perera, Jayatissa and Ramanathan appointed? The other question is; does the Governor get the sanction of the Monetary Board before it releases statements to the public defending its position. 

From insider accounts the Governor runs the Monetary Board like his private property; virtually using the Prime Minister’s name in every sentence. The Board as a result is helpless and hapless. The President who appoints the members must appoint people of stature who cannot be bullied into submission. As Wijewardane points out Central Bank should not make continuous losses and eat up capital. The Board simply can’t get. Why? 

CB Mandate

We all agree a central bank is not considered a profit-oriented institution in any economy. Therefore, Sri Lanka’s central bank should not be judged on the basis of the level of profits it makes. There is no need to debate this issue. This is not what Dr. Wijewardana is trying to get across to the Governor and the Board, which the Board does not seem to get. A depletion of the capital base of the bank means that the tax payers of this country would have to pump money to the Central Bank to build its capital. If this message was not clearly understood by the Board, Sri Lanka is certainly another Greece in the making.

Parliament intervention

Parliament must immediately establish the statutory objectives for our monetary policy for example – maximum employment, stable prices, and moderate long-term interest rates.

The Board must firmly be committed to fulfilling this statutory mandate. In pursuing these objectives, they must explain its monetary policy decisions to the public as clearly as possible. Clarity in policy communications facilitates well-informed decision making by households and businesses, reduces economic and financial uncertainty, increases the effectiveness of monetary policy, and enhances transparency and accountability, which are essential in a democratic society.