Coomaraswamy should be backed to make Central Bank of Sri Lanka independent: Razeen Sally

ECONOMYNEXT – Sri Lanka’s Central Bank Governor Indrajit Coomaraswamy should be supported in his efforts to make the agency independent and end regulatory scandals, a top economist has said amid fears of renewed political interference in the agency.

"I think all those who want to see who want see Sri Lanka have genuinely good independent institutions should support the Central Bank Governor to the hilt," Razeen Sally, Associate Professor at Lee Kwan Yew school of Public Policy in Singapore said.

"The only good senior appointment this government has made was the appointment of Indrajit Coomaraswamy as the governor of the central bank.

"He is just the right man for the job, he has the excellent credentials, he is clean, and he also have a very good temperament.

"I think in the last few months he has done his level best to restore the integrity and credibility to the central bank, focus monetary policy on key objectives starting from price stability and clear up its regulatory act not least the regulation of the primary bond markets."

Sally was speaking at a forum organized by Advocata Institute, a free market think tank and Echelon, business magazine in Colombo.

Sally said monetary policy was very bad until a few months ago.

Coomaraswamy was appointed in July 2016 by President Maithripala Sirisena, amid intense public pressure not to re-appoint Arjuna Mahendran over allegations of securities fraud involving a firm connected to his son-in-law.

Until then the central bank was printing money to effectively finance a budget deficit and also sterilize foreign exchange interventions to keep rates low and boost credit to unsustainable levels.

Sally said monetary policy was ‘very bad’ until a few months ago.

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"The Central Bank became far too politicized over a ten year period, interest rates were kept artificially low and there was too much money printed to basically to support unviable fiscal policy," he said.

"And of course there were scandals with regulation particularly in the primary bond market."

"The only good senior appointment this government has made was the appointment of Indrajit Coomaraswamy as the governor of the central bank.

"He is just the right man for the job, he has the excellent credentials, he is clean, and he also has a very good temperament.

"I think in the last few months he has done his level best to restore the integrity and credibility to the central bank, focus monetary policy on key objectives starting from price stability and clear up its regulatory act."

W A Wijewardene, a former deputy governor of Sr Lanka’s central bank has also raised concerns over apparent attempts to undermine the independence of the Central Bank.

 

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