A cherry-picking Monetary Board when another major ‘bond scandal’ is rubbing on its nose
Monetary Board is the authority on monetary policy
The Central Bank of Sri Lanka has issued a response (available at: http://www.ft.lk/article/536676/Central-Bank-responds-to--Dilemma-in-Monetary-Policy--Monetary-Board-caught-in--The-Devil-s-Alternative-?-) to an article which this writer had published in this series (available at http://www.ft.lk/article/534654/Dilemma-in-monetary-policy--Monetary-Board-being-caught-in--The-Devil-s-Alternative-?) earlier.
This writer’s article had questioned the logic and economic rationale of the loose monetary policy being pursued by the Monetary Board at a time when there is a serious economic crisis looming over the nation.
These issues were raised with the Monetary Board because it is the board which has been incorporated and charged under the Monetary Law Act with the responsibility for pursuing suitable policies for the preservation of the domestic and external values of the rupee, the legal tender currency in Sri Lanka. The institution known as the Central Bank has no legal status under the law; it simply functions as the Secretariat to and the operational arm of the Monetary Board to facilitate the latter to adopt and implement suitable policies. Hence, if the policies adopted by the Board do fail, its members, consisting of the Governor, Secretary to Ministry of Finance and three outsiders, have to take responsibility for such failure.
The Central Bank does not have legal responsibility for such failures, though in the eyes of the public it is usually the Central Bank and not the Monetary Board, which is at the receiving end of criticism by all. In this background, it is presumed that the response under reference had had the sanction of the Monetary Board before its issue. The response does not say so, but chooses to refer to the Monetary Board as CBSL, implying that both are synonymous – an inaccurate representation of the board.
Failure of policy by the Monetary Board
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Source: EconomyNext-Monday, 25 April 2016
Monetary Board is the authority on monetary policyThe Central Bank of Sri Lanka has issued a response (available at: http://www.ft.lk/article/536676/Central-Bank-responds-to--Dilemma-in-Monetary-Policy--Monetary-Board-caught-in--The-Devil-s-Alternative-?-) to an article which this writer had published in this series (available at http://www.ft.lk/article/534654/Dilemma-in-monetary-policy--Monetary-Board-being-caught-in--The-Devil-s-Alternative-?) earlier.
This writer’s article had questioned the logic and economic rationale of the loose monetary policy being pursued by the Monetary Board at a time when there is a serious economic crisis looming over the nation.
These issues were raised with the Monetary Board because it is the board which has been incorporated and charged under the Monetary Law Act with the responsibility for pursuing suitable policies for the preservation of the domestic and external values of the rupee, the legal tender currency in Sri Lanka. The institution known as the Central Bank has no legal status under the law; it simply functions as the Secretariat to and the operational arm of the Monetary Board to facilitate the latter to adopt and implement suitable policies. Hence, if the policies adopted by the Board do fail, its members, consisting of the Governor, Secretary to Ministry of Finance and three outsiders, have to take responsibility for such failure.
The Central Bank does not have legal responsibility for such failures, though in the eyes of the public it is usually the Central Bank and not the Monetary Board, which is at the receiving end of criticism by all. In this background, it is presumed that the response under reference had had the sanction of the Monetary Board before its issue. The response does not say so, but chooses to refer to the Monetary Board as CBSL, implying that both are synonymous – an inaccurate representation of the board.
Failure of policy by the Monetary Board
