Cabinet approves to gazette Central Bank Act 

• Cabinet Co-Spokesman and Minister Bandula Gunawardena says new Act will allow CBSL to operate as an autonomous organisation, limit room to print money

The Cabinet of Ministers at its meeting on Monday has approved the final draft of a new Central Bank Act to be published in the Government gazette and presented to Parliament.

“The new legislation will vest more powers to the Central Bank in terms of the monetary policy and will allow to operate as an autonomous organisation,” Cabinet Co-Spokesman and Minister Bandula Gunawardena said at the post-Cabinet meeting media briefing yesterday.

The proposal to this effect submitted by President Ranil Wickremesinghe in his capacity as the Finance, Economic Stabilisation and National Policies was approved by the Cabinet of Ministers.

Gunawardena also acknowledged that the proposed new law was a result of the influence the Government had from the International Monetary Fund (IMF) and several other international organisations to bring in financial discipline and put the economy back on the right track. 

The IMF in its Staff Level Agreement on the $ 2.9 billion Extended Fund Facility arrangement for Sri Lanka said restoring price stability through data-driven monetary policy action, fiscal consolidation, phasing out monetary financing, and stronger central bank autonomy that allows pursuing a flexible inflation targeting regime. 

A new Central Bank Act is a cornerstone of this strategy, the IMF added.

“The new Act will have powers to reduce the room to print money as and when Government want money, which is good. Money printing was a major cause of the downfall of our economy and its current status. Irrespective of the Governments, they have all printed excess money during their time in office. It caused a severe fiscal deficit and the economic crisis we all experience today,” he said. 

Although the Central Bank of Sri Lanka draft Bill was published in the Government Gazette on 1 November 2019 and tabled in the Parliament for approval, it was not included in the order book. Therefore, on 19 December 2022, a new draft Bill with amendments for the preparation of the Act was approved by the Cabinet of Ministers.