The Central Bank Should Be Relisted Under The Ministry Of Finance Now!
By Hema Senanayake –July 15, 2016
Hema Senanayake
Arjuna Mahendran has gone now. So, it is the time now to relist the Central Bank under the purview of the Ministry of Finance. I submit two important reasons for it. Both reasons are equally important. One reason is about the line of authority and the other is about the macroeconomic management of the economic system. Let me begin as follows.
Recently, top officials of the central bank were summoned to testify before the COPE (Parliamentary Committee on Public Enterprises). According to newspapers, those officials have testified that former Governor Mr. Arjuna Mahendran had violated all laws in the institution. Such a law breaking governor has to be there in order to execute the policy decisions made by the Ministry of Policy Planning and Economic Affairs under which the CBSL has been listed as at now. It is because the secretary to the Ministry of Policy Planning and Economic Affairs does not represent in the Monetary Board. Therefore the said Ministry needs to have a proxy in order to exercise its authority over the Central Bank and the Monetary Board –And that man it seems was Mr. Arjuna Mahendran.
If there was no such proxy, the Ministry of Policy Planning and Economic Affairs would not have had any meaningful authority over the CBSL even if the CBSL is listed under that Ministry, because it is the secretary to the Ministry of Finance who represents the government in the Monetary Board under which Board, CBSL operates. Therefore, if the Ministry of Policy Planning and Economic Affairs wants to instruct anything direct to the CBSL which is the operating arm of the Monetary Board, the Ministry has to have a Governor who is ready to listen and carry out its virtual orders. It is in this process that all laws could have been broken.
Now, let us assume that the new Governor is listening to the Monetary Board not to the Ministry of Policy Planning and Economic Affairs. Therefore, the government’s view or likely decisions to be made by the government must be communicated to the Monetary Board only through the secretary to the Ministry of Finance, because, even though the CBSL listed under the Ministry of Planning its secretary is not a member of the Monetary Board as mentioned above. It is proper for the government to maintain its relationship with the CBSL through the secretary to the Ministry of Finance always. We also hope that the new Governor Dr.Indrajith Coomaraswamy will manage the CBSL by the decisions made by the Monetary Board.
