CBSL must be independent and accountable, reforms will happen: Harsha

By Darshana Abayasingha

Parliamentary Committee on Public Finance (COPF) Chairman Dr. Harsha de Silva says independence of the Central Bank (CBSL) means it should be taken off the grip of the Treasury.

He remarked it was not the fault of the CBSL that it printed money, but it was forced to do so by the Treasury.



Speaking at a webinar hosted by the Institute of Certified Management Accountants of Sri Lanka, the SJB MP added independence does not mean the CBSL cannot be held accountable for its actions, and there must be consequences if it fails to deliver defined objectives.

“What we want to do is remove the fiscal dominance of monetary policy. There are many models to consider. In countries like New Zealand, it is in the Constitution that if the inflation target is not met, the Governor has to find a new job. What we would like is that the Central Bank is not allowed to purchase paper in the primary market.

“They can purchase in the secondary market for its purposes, but the moment the Central Bank starts purchasing in the primary market it becomes a problem. There is a discussion on what needs to change, and there is a draft new Monetary Law act and the IMF is also pushing to get that act through,” Dr. de Silva said.

Responding to questions, the SJB MP said Members of Parliament are meeting with officials of the CEB on the proposed restructuring. He noted that losses could be reduced by adjusting tariff, and it was a matter of discerning an ideal model. This could entail privatization, part privatisation or competition.

“How that is going to be done; I think there will be some sort of agreement in Parliament, and that should have support from political parties immaterial of their ideologies. Because ultimately, we have to make sure there is some sort of equity and social justice.

“The subsidy instead of coming through the SOE should come as cash transfers to the consumer. I’m sure we will find a way that is acceptable to the people of this country. I don’t know whether it will happen under this Government or another, but it will happen,” he stated.

De Silva also touched on the Samurdhi program and remarked it must be depoliticised and the recipient list overhauled, as many persons who receive Samurdhi should not qualify for the program. Recipients must be selected in a transparent manner, he added.