Harsha raises alleged violation of Monetary Law by Govt.

By Ashwin Hemmathagama

Our Lobby Correspondent

Section 89 of the Monetary Law Act No. 58 of 1949 is the latest among the “list of laws breached by the regime,” although it never came to the limelight before.

According to UNP MP Dr. Harsha de Silva, the Treasury has borrowed money from the Central Bank of Sri Lanka on numerous occasions throughout history but failed to make repayments within the stipulated period of six months, creating the largest “written-off” debt amounting to Rs. 95 billion reported in 2012.

Section 89 of the Monetary Law Act No.58 of 1949 defines the provisional advances to the Government by the Central Bank of Sri Lanka on the basis such lending is repayable within a period of six months and the total amount of such advances outstanding at any time does not exceed 10% of the estimated revenue of the Government for the financial year in which they are made.

According to Dr. de Silva, such advances taken by the Treasury stood at Rs. 78 billion in 2010 and have increased to Rs. 95 billion in 2011.

“The Central Bank provides such temporary facilities by printing money. I presume this is the largest debt written off. The last time such temporary advances taken by the Treasury were settled was during Prime Minister Ranil Wickremesinghe’s period in 2003. Ever since subsequent governments have neglected settling it,” said Dr. de Silva, who joined the debate on the Ports and Airports Development Levy (Amendment) Bill, Economic Service Charge (Amendment) Bill, Excise (Amendment) Bill, and Telecommunication Levy (Amendment) Bill.

“We know that loans are required to support development, but we should be careful about where we obtain them from. The Treasury is now shouldering political expenses, forcing the rupee to devalue and increase inflation. Either they have to obey Section 89 or amend it. When the Central Bank was established in 1950, the Chief Guest was Finance Minister late J.R. Jayewardene. Then Prime Minister D.S. Senanayake was an ordinary invitee. During his speech Finance Minister Jayewardene stated ‘I trust that you will remember that money was made for man but not man for money’. What he was trying to say is that monetary policy must be implemented in such a way that you can bring development and welfare for the people. He was a Keynesian,” he added.

Elaborating on the Economic Service Charge amendments, Dr. de Silva said: “Repealing of Section 13 of the Economic Service Charge No. 13 of 2006 releases the Central Bank from its Economic Service Charges. Why should you release it? Economic Service Charge is negligible, amounting to 0.025%. In 2010 the bank has paid Rs. 95 million as Economic Service Charge and in 2011 this has increased to Rs. 120 million. But the profits made by the bank amount to Rs. 46,000 million. So paying Rs. 95 million from an institution that makes a profit of Rs. 46,000 million is not a serious issue. Why do we exempt organisations making huge profits?” questioned Dr. de Silva.