Doings at the Central Bank

It is a well- known fact that with the exit of Dr. Indrajith Coomaraswamy the Central Bank (CB) was turned into an accessory of the ruling party. Under the subsequent Governors, the CB gave up playing the expected roles of setting the needed monetary and regulatory policies, determining the right level of interest rates, maintaining price stability, controlling national money supply safeguarding foreign exchange and gold reserves while overseeing the banking industry.

What they did was mostly opposite of what was required. At least under Prof. W.D. Lakshman the decisions had a semblance of justification but he resigned as he could not take any more dictates from the powers-that-be.

Next came Mr. Nivard Cabraal whose first act was to demand a Cabinet level position while approving for himself a higher salary and a pension with arrears.

The CB and its Anti Money Laundering (AML) arm, the FIU, stopped investigations against the real money launderers and criminals and started following up on the political foes and those who were considered some threat to the ruling party.

This move saw several of the competent CB staff being pushed around or taking early retirement depriving the regulator of its principled staffers and most such positions being handed over to a set of "Yes men". This is the main reason for CB to fail in carrying out its duties. Mr. Cabraal had a free reign making all his claims and fairy tales of having “home grown solutions” and all these went unchallenged by those below him. This was unpardonable.

It is now left to the new Governor and his depleted team to undo the damage and they deserve all the political support. The CB and the FIU needs to take the necessary injunctions acting under the Monetary Law Act and the AML laws now in place and prevent all those who were involved in bringing Sri Lanka to this plight from leaving the country and immediately commence investigations against them.

It is important that all Deputy and Assistant Governors and Heads of Departments also act in the same spirit without isolating and undercutting the Governor. Where a senior Central Banker finds he or she is unable to act independently they need to report to the Monetary Board and the Finance Ministry and be prepared to fight back, always holding the moral high ground while keeping the politicians in their proper place.

Dr. Seevali Gunawardane

Colombo