Sri Lanka’s Coomaraswamy named CB Governor of South Asia
ECONOMYNEXT – Sri Lanka’s Indrajit Coomaraswamy has been named central bank governor of the year in South Asia by an international financial magazine.
Coomaraswamy took over the central bank in 2016, when the economy was de-stabilized by l monetary policy and the institution’s credibility was weakened by corruption allegations.
Sri Lanka’s central bank has tended to print money to keep rates down de-stabilize the economy.
The creation of the central bank with money printing powers in 1951 removed a hard budget constraint allowing politicians to deficit spend and weakened its currency.
Coomaraswamy was quoted as saying that "interest rates will be insulated from the fiscal forbearance of the past, which made Sri Lanka a classic stop-go economy with recurring balance of payments crises and bouts of high inflation."
Coomaraswamy has tightened policy in recent months and Sri Lanka’s economy has stabilized.
Sri Lanka’s rupee is de facto pegged to the US dollar and any attempt to practice independent monetary policy tend to generate BOP crises. (Colombo/Oct16/2017)