• Removal of Treasury Secy. from Monetary Board controversial
• Public Finance Committee sharply divided
• Bandula threatens legal action

By Madhusha Thavapalakumar The Parliamentary Committee on Public Finance, which is currently reviewing the new Monetary Law Act, is sharply divided on the proposal to remove the Treasury Secretary from the Monetary Board of the Central Bank of Sri Lanka (CBSL), The Sunday Morning Business learnt. It is understood that Parliamentarians Bimal Rathnayake and Bandula Gunawardena, representing the JVP and the “Joint Opposition” respectively, in the committee, oppose the move. While repeated attempts by us to reach Rathnayake failed, JVP Parliamentarian and Committee on Public Enterprises (COPE) Chairman Sunil Handunnetti, a former member of the Public Finance Committee, said that Rathnayake and the JVP as a whole vehemently oppose this proposal. “The Treasury Secretary being a member of the Monetary Board has never been an issue to the Central Bank. Therefore, we prefer the current system to continue,” he said. Handunnetti further noted that the Treasury acts as a bridge between the Government and the CBSL, which, if removed, will pose challenges to the authority of CBSL to manage the Employees’ Provident Fund (EPF) and engage in debt management. The drafted act proposes the Government be connected to the CBSL through a separate governing board and for an external independent expert to be appointed to the Monetary Board in place of the Treasury Secretary, which, according to Handunnetti, is unacceptable. Speaking to The Sunday Morning Business, Gunawardena also expressed grave concerns about this proposal. “There is no need to appoint a person from the private sector to the Monetary Board. Just because the International Monetary Fund (IMF) wants changes in the Monetary Board, we cannot agree,” he said. The Monetary Law Act No. 58 of 1949 established the monetary system of Sri Lanka and the CBSL to administer and regulate the system. The Monetary Board consists of five members – the Governor of the CBSL, Secretary to the Ministry of Finance, and three non-executive members. According to the CBSL, in terms of the current Monetary Law Act, the corporate status of CBSL is conferred on the Monetary Board, which is vested with all the powers, functions, and duties. As the governing body, the Monetary Board is responsible for making all policy decisions related to the management, operation, and administration of the CBSL. The Governor is the Chairman of the Monetary Board and also functions as the Chief Executive Officer of the CBSL. The Governor and non-executive board members are appointed by the President on the recommendation of the Minister of Finance at the moment. The approval of the Constitutional Council is also required for the appointment of non-executive board members. In addition to the removal of Treasury Secretary from the Monetary Board, the Act also enables CBSL to operate entirely independently. Commenting on this, Handunnetti noted that there is no point in the CBSL being independent when all other institutions in the country are not dysfunctional. Meanwhile, Gunawardena noted that its independence should not be taken seriously as none of the “independent” institutions in Sri Lanka are actually independent. “For example, take the Election Commission. Even though it is recognised as an independent institution, it is not independent at all. In fact, it has gotten into a mess now,” Gunawardena noted. The new act has been drafted to put an end to wholesale money printing that is carried out by the CBSL at the behest of successive governments over the years. Gunawardena appreciated this need did not appreciate it happening through the new Monetary Law Act and emphasised that it should be done another way. “I’m not a person who is against amendments and I do support some of the changes. Money printing falls into that category. Now let’s say Sajith Premadasa becomes President; he would misuse the money printing powers of the CBSL. But for that, we have to find alternate measures, not in this way,” Gunawardena noted. Speaking further he suggested changes to the Act and that the review should be done neither by him nor the 225 parliamentarians, but by a panel of experienced local economists. However, he noted that the Head of the Committee of Public Finance Parliamentarian M.A. Sumanthiran will submit the review report soon. “If this reaches Parliament with the proposed changes, I’ll challenge the Act at the Supreme Court,” he added. All attempts made by us to contact Public Finance Committee Chairman Parliamentarian M.A. Sumanthiran proved unsuccessful. However, we spoke to one of the 20 members of the Committee of Public Finance, Parliamentarian MP Prof. Ashu Marasinghe, who noted that the committee is in consultation with the Ministry of Finance and CBSL, and it is too early to disclose their final stance. When asked about the controversial clause of removing the Treasury Secretary from the Monetary Board, he noted that the committee had not discussed that provision in detail and are awaiting observations. He noted that the committee will continuously work with the Treasury and CBSL on this matter and have meetings to get their recommendations. “We have two to three meetings at the Public Finance Committee, but there is no exact date. There is no deadline for the review. We have to expedite the process but we have to go through it very carefully without any mistakes. This is why we took some time to study it also,” Marasinghe added. According to Marasinghe, after the compiling of the final report by the committee, it will obtain Cabinet observation and then will send it to Parliament for approval. “Observations have to be received from the Cabinet and in the final stage, we have to give our observations and present it to Parliament. Then, Parliament has to pass it. We will be doing the last step. We usually listen to the observations of the Finance Ministry and the CBSL, and then, we will arrive at a reasonable final judgment.” President Maithripala Sirisena recently raised concerns over the proposed changes in the Act, according to sources. He proposed the National Economic Council (NEC) convene a committee to study the proposed Monetary Law Act. Sirisena also opposed some changes including the ending of money printing and the independence the CBSL would gain under the act. However, CBSL Governor Dr. Indrajith Coomaraswamy, during the last Monetary Policy Review, emphasised the importance of the Monetary Law Act which had already begun to provide benefits to the country despite the criticisms. Addressing the media at the CBSL, he noted that the CBSL was able to raise $ 2 billion since the Easter Sunday incidents and $ 2.4 billion three months after the political crisis in 2018 through the issuance of sovereign bonds mainly due to the assurance given to the investors that the Monetary Law Act is in the pipeline. “One of the things that really worked in our favour was that we were able to tell investors that we are in the process of drafting a Monetary Act which would increase the independence of the CBSL. If we are an upper middle-income country, we have to have frameworks for making macroeconomic policies transparent,” Coomaraswamy noted. Speaking further, he called the act “a landmark piece of legislation” which would be a big selling point in fulfilling the financial requirements going forward. Upon finalising its review, the Public Finance Committee will present its observations to Parliament.