Sweeping changes on future CB governor and Monetary Board appointments
The Governor of the Central Bank (CB) and members of the Monetary Board will, in future, be appointed via the Constitutional Council process under the proposed 19th Amendment to the Constitution, a UNP deputy minister said.
Currently the Governor and members of the Monetary Board are appointed by the President.
“In the proposed 19th Amendment to the Constitution, we have included a proposal to appoint the Monetary Board including the CB Governor with the concurrence of the Constitutional Council,” Deputy Minister Dr. Harsha de Silva told the Business Times.
He said that the proposed 19th Amendment to the Constitution will include some sweeping changes related to economic developments.
“As a big bold step in improving governance in CB, as a committee stage amendment to the 19th amendment, we're making the revised Monetary Law Act, a core component (in the amendments) by bringing it along with Election, Bribery, Procurement and Audit Commissions,” he said, promising large scale and significant reforms in the financial markets. Dr. de Silva said the current agency functions of the Central Bank – public debt management and EPF management are associated with two conflicting objectives where in debt management the Bank will always have to borrow at the lowest possible cost (interest rate) but in managing the EPF the same Bank has to maximize the returns by seeking highest interest rates.
"We'll remove conflicts of interests that the CB has with the Public Debt Department and the Employees Provident Fund (EPF), which has been there since the CB's start." He added that in due course, the Government will take necessary steps to restore credibility and full transparency of the CB.
"This will include investments by the EPF in the Colombo Stock Market (CSE) and debt market,” he said, reiterating that the EPF is not the private fund of a few people who decide on its investments; particularly questionable transactions in the CSE where allegations of ' pump and dump' have been made.
He reiterated that the CB is a place with good professionals and, "we have full confidence in them. The only issue was the politicisation of its head.” The independence of the Central Bank is vital to provide authentic policy direction, he added, noting that they will ensure its independence.
He further added, "From what we now find out, there seems to be bad apples at both the EPF and Public Debt Departments." According to him, the ‘cleaning up’ processes are now on. “We will amend the Monetary Act and the Banking Act to ensure the independence of the CB while separating its core functions.”