Making CBSL independent without accountability will not serve purpose: Eran

SJB MP Eran Wic-kramaratne on Thursday said making the Central Bank of Sri Lanka (CBSL) independent without accountability will not serve the purpose.

“Sri Lanka’s economic crisis is unprecedented. The Central Bank is largely responsible for giving in to political pressures and letting monetary policy be driven by fiscal policy. There is a necessity for an independent Central Bank to achieve its objectives of price stability, financial systems stability and support economic stability,” said Wickramaratne during the debate in Parliament on the new CBSL Bill.  “While the Central Bank should be independent it should also be accountable. While welcoming the features of an independent Central Bank the bill in its current form does not have adequate measures on accountability. Sri Lanka suffers from a lack of accountability in the legal system demonstrated by laws delays and no significant progress on fighting corruption through CIABOC. Therefore, the CBSL bill must be amended to strengthen accountability,” Wickramaratne emphasised.

The SJB MP, a former banker himself, elaborating on the Central Bank’s functions said that the monetary policy is technical, data driven and information price sensitive. Based on which the institution will decide how many treasury bills and bonds, what the tenures, amounts, prices, yields. 

The expansion of a monetary board increases the space for information leaks which may lead to corruption. The bond scam of 2015 is alleged to have taken place with an information leak, though still not proved. Leakage of sensitive information has occurred for decades and parties have benefitted privately from leaked information.

 Therefore, Wickramaratne insisted that they do not want to dilute the monetary board but cautioned that the SJB, as a party opposes the expansion of the monetary board to be subsumed by the governing council of the Central Bank. SJB proposes that the monetary board consist of four independent experts, along with the Governor and the two Deputy Governors, restricting it to seven members without letting it be subsumed by the Governing Board. Out of the 4 independent experts up to two from the governing board could be included.  

The monetary board will be responsible for inflation targeting based on the agreement reached between the Finance Ministry and the Central Bank through a monetary policy framework agreement. If the Central Bank does not deliver on the targets they have to disclose to parliament and the public with remedial measures.

Wickramaratne proposed amendments to Article 19 to include the breach on the monetary policy framework agreement also as a condition for the disqualification and removal of officials from office. He emphasized that the damage during 2019-2022 would then never be repeated and will strengthen the hand of officials to stand up to political interferences.