New Monetary Law Act to parliament next month

Finance Minister Mangala Samaraweera is to present the new Monetary Law Act that aims to depoliticise the Central Bank (CB) to the parliament next month.  

“If there is one reform that will stabilise Sri Lanka’s macro economy, that will be the depoliticisation and ensuring the independence of the Central Bank. 

That is what will be done when the Monetary Law Act goes to parliament in the next month; complemented by fiscal rules and legislation designed to prevent Sri Lanka from living beyond her means,” Samaraweera revealed. 

He pointed out that chronic macroeconomic instability in post-independent Sri Lanka was mainly due to the government’s influence on CB’s money printing.

“You all know that Sri Lanka has experienced chronic macroeconomic instability since independence. Since then, we have had no fewer than 16 IMF programmes. 

“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,” he added.

As Sri Lanka doesn’t have permanent secretaries to the ministries any longer, Samaraweera went on to say that the inclusion of a Secretary to the Treasury in the Monetary Board undermines the independence of the CB.

“As you all know, 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,” he noted.