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Central Bank of Sri Lanka and public finances: Accountability key to resolving current crisis 

02 Apr 2022

  • Transparency and accountability in finance vital
  • CBSL credibility important for debt restricting
  • Not answering Parliament call raises questions over CBSL independence
By Skandha Gunasekara The failure of the Central Bank of Sri Lanka (CBSL) to appear before the parliamentary Committee on Public Finance (COPF) shines a spotlight on the lack of accountability that surrounds public financing in Sri Lanka, especially at a time the country is on the brink of default and struggling to secure assistance to stay afloat. On 24 March, Samagi Jana Balawegaya (SJB) Parliamentarian Dr. Harsha de Silva speaking in Parliament charged that none of the officials of the CBSL were present at the COPF meeting held that day despite several memos being sent to the CBSL. “We had the COFP meeting this morning and it was informed to the CBSL that [Central Bank Governor] Nivard Cabraal and [Treasury Secretary] S.R. Attygalle should attend the meeting as the country is in dire straits and we must make immediate decisions before everything collapses. At 10.41 a.m. we received a fax from the CBSL saying that the CBSL officials would not be able to attend the meeting. Neither Cabraal nor the Finance Minister have spoken in Parliament; Finance Minister Basil Rajapaksa has not attended Parliament in over three months. Are they not answerable to the people regarding the handling of public finances?” Dr. de Silva questioned. The CBSL officials in question were the members of the Monetary Board which consists of CBSL Governor Ajith Nivard Cabraal (ex-officio), Treasury Secretary S.R. Attygalle (ex-officio), President’s Counsel Sanjeeva Jayawardena, Dr. Rani Jayamaha, and Samantha Kumarasinghe. The meeting with the COPF had initially been scheduled for 21 March but then had been postponed to 24 March on the request of the CBSL. Repeated failures of the CBSL to appear before Parliament – which has oversight over all matters related to public finance in accordance with the Constitution – could be seen as a matter of accountability and raises questions as to what the CBSL is trying to hide or what it fears in appearing before Parliament. Accountability in public finance critical Economist and University of Colombo Department of Economics Lecturer Umesh Moramudali told The Sunday Morning that at a juncture when the country was looking to go for a programme with the International Monetary Fund (IMF), accountability in public finance was critical. “It is probably one of the most important things right now given the current crisis we are in because when we are going for an IMF programme or debt restructuring arrangement. What we need most is the confidence of international investors or the ones who have bought our sovereign bonds, because restructuring requires fiscal discipline that gives the indication that we are committed to make these payments and to make the changes and that we have the capability to repay them.” Moramudali asserted that because of the credibility needed for debt restructuring, transparency and accountability were key in moving forward as the current perception of Sri Lanka by the international community was one of mistrust when it came to public finance and the issue of settling public debt. “Currently we have a huge credibility issue and the IMF, international investors, and bond holders have a hard time trusting the Government. For that trust to happen, accountability and transparency are very important. I would even go to the extent of saying that we can’t do anything without a substantial level of accountability and transparency in terms of public debt.” According to him, all public institutions, including the CBSL, have the responsibility to be answerable to Parliament and explain the rationale on which certain decisions had been taken, especially during a crisis like what the country was currently experiencing. Advocata Institute Chief Operating Officer Dhananath Fernando too pointed out that Parliament was the ultimate authority over public finance, but raised questions as to whether the Parliament itself was equipped with the right personnel to carry out that task. “Parliament is responsible for public finance, so it is very important that we maintain regularity. The problem is that our policymakers don’t have enough depth to have this governance system with transparency and accountability. That is the problem in my view.” A matter of accountability Meanwhile, SJB MP Eran Wickremeratne pointed out that Parliament was not looking to give directions to the CBSL on its operations and that the summons by the COPF was on matters of accountability. “According to Article 148 of the Constitution, Parliament is the final authority on issues dealing with finance and the economy, so it is really an accountability issue. Nobody is instructing the Central Bank what to do. If the Committee on Public Finance – which is an all-party committee – has made a request, then they should certainly be coming before Parliament.” He then pointed out that there was public outcry over the independence of the Central Bank, questioning its recent decisions, and that appearing before Parliament and being answerable to Parliament would give credence to the Central Bank’s intentions. “Now, if they have refused to come before Parliament, then it raises the question of what it has got to hide. Why is the Central Bank scared of coming to Parliament? If their argument is independence, then it is only Parliament that can ask the bank whether it is actually independent because the public opinion in the country is that monetary policy has been determined or driven by the fiscal policy of the Government and the independence of the Central Bank has anyway been brought into question. So they should be coming and actually providing answers to Parliament.” Wickremeratne also pointed out that accountability was important in the aspect of the current economic crisis as the people needed confidence in financial institutions – the Central Bank in particular. “Accountability is even more important today than it has ever been previously because we are going through an unprecedented economic crisis that the country has never seen in its history, at least not in this century. So, in a situation like this, the public needs to have confidence that there is transparency and information and that there is no corruption. There are many questions about corruption, procurements, and procurement processes, so I would say it is even more important today than it was yesterday.” When asked as to what steps Parliament could take if the Monetary Board failed to appear once again, MP Wickremeratne said that it could summon each member in their individual capacity. “The Parliament will be able to summon the individuals before Parliament – there are constitutional processes. This is not a party that is summoning them, it is Parliament that is summoning them and all political parties in the Government and Opposition will come together on this matter.” Multiple attempts to contact the CBSL Monetary Board were unsuccessful.  

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