• SC case reveals alleged instructions from former President’s Secy.
• Counsel argues moral suasion as a legitimate tool used by CBSL
• Former CBSL Governor informed Fin. Min. of need to rethink forex policy

Former Governor of the Central Bank of Sri Lanka (CBSL) Prof. W.D. Lakshman has alleged before the Supreme Court (SC) that the exchange rate of the country was never fixed at Rs. 203 under the provisions of the Monetary Law Act and that the CBSL had merely directed the banks to maintain the exchange rate at such levels in accordance with instructions received from former President’s Secretary P.B. Jayasundara.

Making submissions before the Supreme Court on the two Fundamental Rights (FR) applications bearing numbers SC FR 195/2022 and SC FR 212/2022 seeking accountability from the Rajapaksas and other leading bureaucrats of the former regime for the current economic crisis, the counsel for Prof. Lakshman pointed out that the CBSL had never issued and published in the gazette a direction fixing the exchange rate at Rs. 203 in terms of the provisions of the Monetary Law Act.

Instead, it was argued that the CBSL Governor had merely sought the support of Licensed Commercial Banks (LCB) in navigating the ongoing economic crisis by requesting the banks to maintain the exchange rate at Rs. 203 and that such moral suasion was a legitimate tool available to the CBSL. 

Moreover, it was further highlighted that the request to maintain the exchange rate at Rs. 203 was in accordance with instructions received from former President’s Secretary P.B. Jayasundara. 

The counsel for the former Governor pointed out that the same was reflected in the audit report submitted by the Auditor General to the court titled ‘Audit Report Including Observations of the Auditor General Pertaining to the Fundamental Rights Case No.195/2022’. 

It was further submitted that the CBSL was part of the Executive branch of the Government and, as a result, had a duty to follow the instructions of the President’s Secretary. It was pointed out that the Secretary was essentially speaking on behalf of the President, who was the ultimate authority within the Executive branch.

The counsel for the former CBSL Governor further highlighted that the audit report had correctly identified that Prof. Lakshman had promptly informed the Finance Minister by way of the reports submitted under Sections 64 and 68 of the Monetary Law Act, dated 30 June 2021, 26 July 2021, and 14 September 2021, of the need to rethink the exchange rate policy of the Government as the CBSL was unable to maintain the exchange rate. 

In particular, it was highlighted that Prof. Lakshman had explicitly informed Finance Minister Basil Rajapaksa of the need to allow the exchange rate to be determined by the market.