Sri Lanka new Central Bank Governor Indrajit Coomaraswamy takes on tough job
ECONOMYNEXT – Sri Lanka’s President Maithripala Sirisena has made Indrajith Coomaraswamy, a respected economist, as Central Bank Governor, responding to intense public pressure not to re-appoint its controversial previous incumbent.
Central Bank watchers say Coomaraswamy faces tough job in not just conducting monetary policy with domestic inflation rising, the balance of payments fragile due to recent loose policy but also in re-building an institution diminished by controversy and politics.
"After consulting all parties concerned, I appointed top economist Dr. Indrajith Coomaraswamy to lead the Central Bank of Sri Lanka," President Sirisena said in a Twitter.com message Saturday.
Coomaraswamy is expected to take office on July 04, reassuring financial markets and investors who were concerned at the apparent inability of an administration which could not agree on a candidate for the headless monetary authority.
A former director of economic affairs at the Commonwealth Secretariat, London; Coomaraswamy had also worked in Sri Lanka’s Central Bank and Treasury. He has a doctorate from the University of Sussex and is a graduate of Cambridge. He studied at Royal College, Colombo.
"It is a very good appointment which will bring stability, recognition to the central bank under his leadership," Chandra Jayaratne, a former head of Sri Lanka Ceylon Chamber of Commerce and governance activist, who campaigned for an honest person to head the Central Bank.
"He has the knowledge, the skills and unquestionable integrity required for the job."
Former Governor Arjuna Mahendran whose term ended on June 30 was under a cloud over alleged rigging of bond auctions and insider dealing involving a firm owned by his son-in-law.
Some of the bonds were later alleged to have been dumped at high prices at a state-managed pension fund of private sector workers. He has denied wrongdoing.
Prime Minister Ranil Wickremesinghe said that no charges were proved against Mahendran, generating a political stand-off that some political analysts feared may split Sri Lanka’s so-called unity government which came to power on a promise of good governance.
A report by Sri Lanka’s auditor general commissioned by a parliamentary oversight committee on public enterprises said last week that Mahendran had failed to display "professional due care".
President Sirisena came under intense pressure not to re-appoint Mahendran, who said he was standing aside until the parliamentary committee finished its probe and cleared him.
The central bank also came under fire during the term of ex-Governor Nivard Cabraal who resigned in early 2015, over deals involving the pension fund and pump and dump stock trades.
During the period it also acquired a name for responding to critics including opposition politicians and respected economists in disparaging terms and attempting to be-little them with ad hominem attacks.
John Exter, a US-Fed official who was the architect of the Central Bank, had required that the Governor be a man "unquestioned integrity and responsibility," who had "outstanding competence" of the country.
The central bank’s Executive Officers Union also wrote to President Maithripala Sirisena as Mahendran’s term was drawing to a close.
"In the recent past persons have been appointed as Governor and members of the Monetary Board based on political considerations who lacked the qualities outlined by Exter," the union wrote.
"As a result controversial situations have developed and the good name of the Bank had been harmed."
The top management of the bank is also divided.
According to the Monetary Law that governs the central bank, the senior most deputy governor is assigned to take over Chief Executive fuctions in place of the Governor as ‘Senior Deputy Governor’.
During the Rajapaksa regime, the Union told in a letter addressed to the monetary board, a practice had started where a junior deputy governor is designated ‘Senior Deputy Governor’ or SDG when the top man is away.
"The undeclared intention was to create subservience at the second level of management hierarchy of the Bank," the Union wrote.
"With the rotation of the SDG position, one time superior (CEO) becomes subordinate to the subordinate at the next time."
There is also perception among some market participants that especially during the last 18 months it’s monetary and exchange rate policy was subject to growing fiscal dominance.
He took on a job that several respected economists refused.
Analysts say the person who is taking over will not only have to conduct monetary policy but also re-build the institution.
Central Bank watchers say the culture of the institution has to be de-politicized, its independence restored and a second level of management nurtured to take over. (Colombo/July02/2016 – Update II)