Central Bank fast becoming a rubber stamp
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Removing the Central Bank from the ambit of the Finance Ministry, whatever the reason, and bringing it under the ambit of the Prime Minister’s office last year was bad enough.
At the time, the Business Times was off the blocks suggesting that such a precedent was fraught with danger and could lead to other issues.
So it is. Now the banking regulator is being stripped of its primary role of managing the country’s debt – all for the sake of a few individuals.
The country’s economy it seems has never lost its political manoeuvering. The reality is such that we even have an association of economists representing the ‘political economy’ – SLAPE (Sri Lankan Association of Political Economy) – formed recently by a band of professional economists.
You just can’t get away from the fact and reality that the economy has been politicised from top to bottom and vice versa, over the years. Everyone wants to put their fingers in the economic pie. To hell with the consequences.
The government blames the former regime et all for the politicisation of the Central Bank. Former President Mahinda Rajapaksa shoves the same accusation back at the present administration.
Both are correct, in a way. While during the past regime, it was Mahinda’s way of doing things with close aides like P.B. Jayasundera (tight control on the economy, Treasury-wise) and Nivard Cabraal (tight control on the economy, Central Bank-wise), under the present administration it appears to be a free-for-all.
There is no consistency in the way things are managed at the moment, creating doubts and uncertainty in terms of policy formulation, one of the biggest deterrents to foreign investment. Every week a proposal by the UNP section of the government is opposed by the SLFP section and vice versa. Rather than thrash out an agreement before-hand, the issues come out after proposals are made
This week the proposals thus impacted, as far as the Business Times is aware (there may be more that have gone through this circle of doubt), are the brakes on the proposed increased water tariffs, Finance Minister Ravi Karunanayake’s typical-comment-by-a-politician of being misquoted on the 2,500-rupee minimum fine on traffic offences, and the President ordering a review of a proposal to provide costly jeeps to 56 handpicked MPs.
The administration’s strategy of doing things is to find ways of accommodating politicians, whether the credentials are right or not for the job at hand doesn’t matter, and then make the job fit the man; rather than finding the best man or woman for the job. That’s one of the reasons why the CB was taken away from the Finance Ministry giving additional headaches to the Attorney General to clear any doubts as per the Monetary Act as to whether this was possible. Though the Act has ‘the Finance Minister’ or ‘in consultation with the Finance Minister’ in every chapter and verse, it was however over-ridden by the fact that the President, through his superior powers, brought this subject under the Prime Minister’s ministry.
After that ‘mishap’, true to our word, more functions are being whisked away from the country’s primary institution leaving the CB naked with little to do.
Both administrations are to blame for this kind of political-weighted management. For instance the CB under the former administration got involved in non-banking matters like coordinating Sri Lanka’s bidding process to host the Commonwealth Games, among other matters.
A couple of months ago, the CB transferred an onsite probe into Perpetual Treasuries to the non-bank supervision department from the public debt department which has more experience in these matters. Rather than revamp the department because of accusations that some in that section connived in the infamous Treasury bond scam, the investigation is handed over to a section that is not as experienced in such complex examinations.
In taking away departments and bringing them under political control (Ministry of Finance), the independence of the department of public debt is being seriously compromised in a never-changing scenario.
Like my Kussi Amma Sera would say, “Mahattaya, Unnuth ekai, Munnuth ekai”.
Will the Central Bank be relegated to being just a rubber stamp? Is Yahapalanaya or good governance becoming a thing of the past and the public forced to swallow the promises made in January 2015 by Maithri, Ranil and co?
At this week’s 30th anniversary of the Ravaya newspaper, its founding editor Victor Ivan said – in the presence of the President – that people are disappointed the ways things are happening. Whether the President takes this or for that matter the many times similar statements have been made in his presence to heart, remains to be seen.
As far as the CB is concerned, it’s losing its independence. The present generation of central bankers is not made of the sterner stuff of those of yesteryear when officials would step down rather than compromise the integrity of their institution. What more is in store for the bank, further down the road, only the politicians (not soothsayers) can tell!
According to the CB’s stated mission, “The bank would always strive to upgrade its services, even to standards higher than international best practices.”
Removal of the public debt department apart from the department of exchange control doesn’t seem to be in keeping with international best practices. Furthermore handing over the country’s national payments system to private parties is not safe at all, according to central bankers themselves.
While there are a few good men in the right places, in today’s culture unfortunately, few people step down if they are not able to do a job they have been handpicked for. A rare occasion was Dr. Sumith Pilapitiya who recently resigned from the post of Director General of the Department of Wildlife Conservation, citing interference. In the political arena many decades back, one can think of Gamani Jayasuriya, then the Minister of Agriculture, quitting on a matter of principle.
Pity Dr. Indrajit Coomaraswamy. The respected economist was brought in to restore sanity at the institution and take it to greater heights amidst a pall of gloom. The institution still faces accusations of politicisation (the Finance Minister’s word) and for this reason, removal of public debt. If the government has confidence in him, why remove some of the functions of the Central Bank? The whole purpose of Indrajit’s entry was to restore dignity to the institution. If so, why this harsh treatment?
For the moment the die is cast and we can say goodbye to an institution that was once independent. If politics invaded the banking regulator in the 2004-2014 period, it has taken a turn for the worse by not only intrusion but also removal of some of its key functions.
| Letter | |
| “Driving Innovation through Classroom” The interesting article last week in the Business Times (Kussi Amma Sera column) referred to patients in government hospitals being shown what it costs for their treatment and care. The purpose of the medical bill proposed to be given to the patient at the time he leaves the hospital is to make him aware of the money the government has spent to keep him alive and later tax him to find money to meet the expenses of the parliamentarians! Why don’t they propose to issue a similar bill to parliamentarians also to know how much has been grabbed from the public to represent them in parliament? This information should also be available to the public as well so that they can come to know whether they have got back their money’s worth. J. Kariyawasam Colombo |