ECONOMYNEXT – Attempts to put operations of Sri Lanka’s central bank out of the ambit of a draft ‘Right to Information’ bill are wrong and will deny economic democracy to the people, a top economist and former central banker has said.
W A Wijewardene, a former Deputy Governor of the Central Bank of Sri Lanka says through a section of the bill rulers have "denied the citizens the access to a wide range of economic information affecting their lives."
Information over (i) Exchange rates or the control of overseas exchange transactions; (ii) The regulation of banking or credit; (iii) Taxation; (iv) The stability, control and adjustment of prices of goods and services, rents and other costs and rates of wages, salaries and other income; or (v) The entering into of overseas trade agreements have been exempted.
By keeping information on exchange rates or credit, the central bank has been effectively kept out of the RTI bill, he notes.
"The first two denials relate to the operation of the Central Bank, while the others to important economic policies that are being adopted by the Government," Wijewardene wrote in an opinion column in Sri Lanka’s Daily FT newspaper.
"These denials are inconsistent with the Government’s avowed goal of establishing an economic democracy in the country. Economic democracy requires wide consultations on economic policies.
"As argued above, consultations would become unproductive if citizens are not empowered with requisite knowledge. Knowledge gets built up in citizenry only if they are allowed to have free access to information.
"If access to information is denied, the citizens would participate in economic consultation with the government without proper knowledge.
"Such a situation will defeat the Government’s objective of delivering economic democracy to people by making economic consultation a mockery."
Parliaments were first set up in Europe to debate over taxes that the ruler (sovereign) charge from people and make sure that they are well spent. The first requirement was that a voter or a representative should be a tax payer.
However critics say now parliamentarians have acquired powers of the king, by exempting themselves from taxes and charging taxes from the rest of the population and mis-spending money just like European kings did.
Central Bank, with money printing powers are the most dangerous agencies ever created. By expanding money supply, they can boost credit, expand demand and destroy currencies and push up prices.
"It can cause the pendulum of a rising and falling market to swing gently back and forth by slight changes in the discount rate, or cause violent fluctuations by a greater rate variation and in either case it will possess inside information as to financial conditions and advance knowledge of the coming change, either up or down," Senator Charles August Lindberg said protesting the setting up of the Federal Reserves.
"This is the strangest, most dangerous advantage ever placed in the hands of a special privilege class by any Government that ever existed."
In the past central bankers who printed large volumes of money have been beheaded. There is now a debate in the US on how to regulate the Fed, after the latest economic bubble and economic collapse it created.
There have also been calls to reform Sri Lanka’s central bank to reduce its discretionary powers to print money and destroy the exchange rate.
The agency has also come under fire for corrupt practices during the last regime and also over the past year.
The government especially the central bank had a lot of insider information, which can be used to manipulate markets by those with access to the information.
"Through the exclusion of exchange rates, control of overseas exchange transactions and regulation of banking or credit, the draft bill has made the Central Bank unreachable by the citizens," Wijewardene said.
"The wisdom portrayed by this exclusion relates to principles of central banking accepted by world nations in an era gone by long ago.
"The accepted version of central banking today is that since they belong to people and not to politicians in power, they must be made accountable too.
"Central banks earn the trust of people not because they are owned by the state but because they adhere to a set of governance structure that makes them accountable for the action they take."
The Reserve Bank of India is not exempt from the RTI bill, Wijewardene said.
"The Reserve Bank of India is fully subject to the provisions of the Act and has informed the public through its website a detailed description of its activities including the salaries and emoluments paid to all officers of the Bank
"The Indian Supreme court has even directed RBI recently that it should disclose information relating to banks to the public."
India’s Supreme Court has said that the country’s central bank "has a statutory duty to uphold the interest of the public at large, the depositors, the economy and the banking sector of the country, and not the interest of individual banks."