Central Bank enters new era, reconstitutes Monetary Board
Sri Lanka’s Central Bank (CB) is entering a new era of encouraging growth in the wake of the COVID-19 crisis and for this purpose is reconstituting the Monetary Board to tackle different economic issues in line with the present administration’s new policies.
The Monetary Board is to be given a new role along with the improvements and a deepening of the financial system.
Senior government officials said that there is need for a shift in the conventional policy measures towards new trends in central banking such as ‘helicopter money’, popular nominal GDP targeting regime and developmental banking. Helicopter money is the term used by central banks for a large sum of new money that is printed and distributed among the public, to stimulate the economy often during a recession, according to experts.
In this backdrop, two members of the Monetary Board Nihal Fonseka and Dr. Dushini Weerakoon were asked to step down, ahead of the scheduled completion of their terms, paving the way to appoint new members in accordance with the needs of the present regime, these officials disclosed. They were appointed by the previous regime.
The two non-executive members submitted their letters of resignation to President Gotabaya Rajapaksa effective May 31 at the ‘request’ of presidential secretary Dr. P.B. Jayasundera, a senior official said. Mr. Fonseka is a former chairman of the Colombo Stock Exchange and banker while Dr Weerakoon is the Executive Director of the Institute of Policy Studies.
The non-executive board members are nominated by the President before they are submitted for Constitutional Council approval and each appointment is for a six-year term. They cannot be removed even if there are political changes and can be replaced only if they resign on their own will. The same rule applies to the appointment of the CB Governor.
Mr. Fonseka was appointed in July 2016, and has resigned before the completion of four years, while Dr. Weerakoon was appointed in July 2019 and has resigned during her first year.
According to other sources, there also appeared to be differences of opinion between CB Governor Prof. W. D. Lakshman and these two members on recent monetary policy decisions and the recent regulatory actions of the CB including current money printing. These two members were not available for comment on their resignations.
Meanwhile Dr. Kenneth De Zilwa, Managing Director Econsult Asia (Pvt) Ltd and senior economist Prof. S.S. Colombage are tipped to be appointed as their replacements.
The third non-executive board member is Sanjeewa Jayawardena PC, who was appointed in February this year by the present regime. The 5-member board includes two ex officio members – CB Governor and the Secretary to the Treasury.