All laws pertaining to Central Bank to be revisited for overhaul: official

By Chandeepa Wettasinghe

The Central Bank is currently in discussions with the government to possibly amend all the laws pertaining to the Central Bank and monetary system, according to a Central Bank official.

“The financial system is evolving and the laws we have are old. So we are in discussions to bring in new laws,” Central Bank Bank Supervision Director A.A.M. Thassim said last week.

This collaborative approach may ease fears that the government is browbeating the Central Bank into irrelevancy.

After initially saying that the Monetary Law Act and Banking Act will be getting new editions, following inquiries, Thassim went on to say that all laws related to the Central Bank may be revisited for overhaul.

There are 10 pieces of legislation, which are pertinent to the Central Bank, including the Payment and Settlement Systems Act, which recently became a hot topic due to the attempts made to set up a National Payments Platform outside the purview of the Central Bank. One of the 10 laws was revamped this year; the Foreign Exchange Act replaced the draconian Exchange Control 
Act in July.

Prime Minister Ranil Wickremesinghe last week said the Monetary Law Act would be amended to make the Central Bank focus on the essential functions instead of peripherals. At the time Wickremesinghe said this, there had been no confirmation whether the Central Bank was being consulted on the reform effort.

r. Indrajit Coomaraswamy called on the government to collaborate with the Central Bank to provide it with more teeth under the legislative reforms, after several attempts were made by politicians, including the former Finance Minister Ravi Karunanayake, to bring the Central Bank under their control.

The Central Bank falls within the purview of the Finance Ministry under the Monetary Law Act and the treasury secretary also sits as a member of the Monetary Board of the Central Bank, creating the risk of the Central Bank becoming politicized and a tool of populist, vote grabbing policies.

Numerous experts have called for such restrictions to end and for the Central Bank to have complete autonomy from the political system.

The Central Bank is currently under the National Policies and Economic Affairs Ministry portfolio held by Wickremesinghe through a gazette notification, which apparently contradicts the legislation passed in parliament. Similar contradictions are causing significant confusion and inefficiency in other ministries.