CB Governor says: Economic system is politicised, not the CB

Strongly denying the allegation that the Central Bank was politicised, CB Governor, Dr. Indrajit Coomaraswamy told reporters in Colombo last week that it was not his institution that was politicised but the country’s entire economic decision - making system.

According to Dr. Coomaraswamy, this is the perennial challenge that he encounters in carrying out his role as the governor of the Central Bank. Hence he called for a proper balance between economics and politics, to employ prudent macroeconomic management, as the country is now exposed to global capital markets and credit rating agencies more than ever -- and they could treat Sri Lanka brutally if the economy was badly handled. In response to the recent allegations levelled at his institution, Dr. Coomaraswamy stressed that he did not see any politicisation in the Central Bank as claimed, but pledged that he would make an attempt to depoliticise the economic decision-making system which had been plagued by undue political interference for over 70 years by successive administrations. “We need to depoliticise economic decisionmaking more. In fact, I have seen some comments that the Central Bank is politicised. I don’t see that. You know I have been here for four or five months, and the Monetary Law Act (MLA) is fairly clear in terms of the responsibilities of the Monetary Board and Central Bank,” he said.

The Central Bank recently came under fire by the country’s vocal Finance Minister Ravi Karunanayake, who repeatedly accused the monetary authority of being politicised while attempting to encroach upon the affairs of the Monetary Board of the Central Bank, risking the independence of the institution.

The budget for 2017 presented by Karunanayake last month, in fact, contained several proposals that could undermine the authority of the Central Bank.

The budget proposed to increase the capital levels of the banks and primary dealers while directing the banks to provide loans to areas of the economy the government deemed important. These clearly fall under the Central Bank’s purview as the banking sector regulator.