Salary hike exaggerated to erode independence: Dr. Weerasinghe

Dr. Nandalal Weerasinghe

• Cautions that undermining independence could take SL back to troubled state
• Says using salary issue to change law is a major risk

The recent uproar over the Central Bank’s salary increases has caught widespread attention and according to Governor Dr. Nandalal Weerasinghe, this controversy is a deliberate attempt to undermine the institution’s autonomy. 

He cautioned that exaggerating the salary increases to undermine the financial sector regulator’s independence could severely impact the economy, potentially regressing it to its troubled state just a few years ago.
“Our need for the Central Bank independence in setting wages and salaries for the staff is quite important to avoid undue influence from the fiscal authorities. That was the issue earlier. 

The salary issue we can talk temperately if it is immoral or unethical. That we can discuss separately. But using this issue to oppose the Central Bank or compromise the independence by changing law is a major risk,” he added.

While this is not the first time the Central Bank has reviewed salaries, Dr. Weerasinghe pointed out that it is the first time that the institution has gone public with the revision.

“We are transparent. We are coming out and telling Parliament on the increase and why we have increased (salaries and wages). We are being accountable,” he said.

Dr. Weerasinghe cautioned that the end result of the Central Bank losing its independence would be another crisis.

“An example of that was seen in 2019. The Central Bank new bill was initiated but a policy decision was taken by the administration that came into power that the institution does not need independence and that fiscal dominance must be asserted.

We all learnt lessons of that in the next two years. With the independence of the Central Bank, we were able to bring back the stability. But people are now forgetting the value of independence and trying to compromise that,” Dr. Weerasinghe said.

Earlier this week, the Central Bank was slammed in Parliament for the salary hike, with the MPs frowned upon the move, stating it is a violation of the law.

At the party leaders’ meeting, it was highlighted that the hike could cost an extra sum of Rs.232 million monthly.