ECONOMYNEXT – The new monetary law which is to be presented to parliament next month will ensure de-politicization and independence of Sri Lanka’s Central Bank whose money printing power has been the main cause of economic instability, finance minister Mangala Samaraweera said.
Sri Lanka has experienced chronic macroeconomic instability since Independence, he told the opening of the Ceylon Chamber of Commerce Economic Summit.
“Since then, we have had no fewer than 16 IMF (International Monetary Fund) programmes,” Samaraweera said.
“The pre-eminent cause for this instability is the fact that the government can finance its deficit by instructing the Central Bank to print money.”
In addition, he noted, the Secretary to the Treasury sits on the central bank’s Monetary Board.
“Ministry secretaries are now political appointees. This government has respected the independence of the civil service. But many governments, if not most, have not done so.
“If there is one reform that will stabilize Sri Lanka’s macroeconomy, it is Central Bank de-politicization and independence,” Samaraweera said.
“That is what will be done when the Monetary Law Act goes to Parliament in the next month; complemented by fiscal rules legislation designed to prevent Sri Lanka from living beyond her means.”
(COLOMBO, 18 Sep, 2019)