SC clears two Monetary Board members from petitions filed over economic crisis

The Supreme Court, in its recent judgment regarding two fundamental rights petitions filed over economic crisis, while holding the guilty persons liable and naming them, including one member of the Monetary Board, decided not to make any adverse decisions or orders against two Monetary Board members, President’s Counsel Dr. Sanjeeva Jayawardena and Dr. Ranee Jayamaha. 

Instead, the Court, by its majority decision held that former Central Bank Governors Prof. W.D. Lakshman, Ajith Nivard Cabraal, former Treasury Secretary S.R. Atygalle and Monetary Board member Samantha Kumarasinghe had violated the public trust. 

At the forefront of the judgment of the Supreme Court, the Court has clearly stated that Leave to Proceed was not granted against Members of the Monetary Board, Sanjeeva Jayawardena, P.C and Dr Ranee Jayamaha. At the end of the judgment as well, the Court identifies the exact parties against whom adverse declarations and orders are made and one appointed member of the Monetary Board, Samantha Kumarasinghe has been made liable, and the Court has not made any adverse decisions or orders against Sanjeeva Jayawardena PC and Dr. Ranee Jayamaha.

In their judgment, the Court had quoted extensively from the oral submissions made by Sanjeeva Jayawardena PC, including how the loss of Rs. 600 billion of taxes had resulted in massive impairment to domestic revenue mobilisation and Treasury operations and in the downgrading of sovereign ratings and banks ratings and preventing access to foreign capital markets and aggravating the Balance of Payments crisis.

The Supreme Court also notes that the minority on the Monetary Board, being Sanjeeva Jayawardena PC and Dr. Jayamaha, had agitated the importance of imposing meaningful Exporter Conversions, Restrictions on non-Essential Imports, 150% LC Margins, in order to prevent dollar leakages as well as an urgent IMF program, and the dire situation of the foreign reserves not permitting the Central Bank to use its reserves to defend the exchange rate.

The judgment makes specific reference to the revelations made by Sanjeeva Jayawardena that on 6 April 2022, pursuant to the Parliamentary Committee on Public Finance, how one of the members of the said Committee, urgently requested Sanjeeva Jayawardena to have a one-on-one meeting to fully brief then President Gotabaya Rajapaksa of the actual, critical situation of the reserves.

The judgment states that in preparation for this meeting, Jayawardena had obtained statistics with regard to foreign reserves and the inflows expected and the outflows that would be imminent, due to the upcoming debt service deadlines and the expected further decline of the reserves and the need for an IMF anchor.

The judgment goes on to refer to Jayawardena’s important revelation that the original letter that the then President had sent to the IMF on 18 March 2022, was ambiguous and no request had been made in that letter for a full EFF program and was cryptic, and hence, mixed messages were being sensed by the IMF. The judgment states that at the meeting, Jayawardena had fully briefed the President on all aspects and had informed him that that there is no other option for the country, but to secure a fully-fledged Fund Supported Program from the IMF.

The judgment explicitly notes that on the suggestion of Jayawardena, the President had agreed to send a completely fresh communication to the IMF, requesting a full IMF program.

Accordingly, on 7 April 2022, the letter facilitated by Jayawardena, had been signed by the then President, seeking a full IMF Fund program, and sent to the IMF and on the following day, a follow on letter was sent to the IMF by the new Governor, thereby, facilitating and paving the way for the GOSL to formally announce the broad debt standstill on 12 April 2022.

The Court has also found that the Monetary Board External Debt Monitoring Committee, Chaired by Dr. Sanjeeva Jayawardena and Vice Chaired by Dr. Ranee Jayamaha, had made a very critical contribution with numerous, strong recommendations and it had repeatedly highlighted the urgent need for an IMF program, in order to prevent a disorderly sovereign default and BOP crisis, and preserving gross official reserves and exchange rate stability, through a credible, multilateral anchor.