Comments /863 Views / Friday, 6 April 2012 00:01
The Daily FT on Thursday featured on page 1 a story based on some startling comments and allegations by UNP MP Dr. Harsha De Silva and young business leader Dilith Jayaweera. The headlines and the contents wouldn’t have been a good read for President Mahinda Rajapaksa, who is also the Minister of Finance and Planning, his Ministry Secretary Dr. P.B. Jayasundera and Central Bank Governor Nivard Cabraal.
The underlining message from the comments of both Dr. De Silva and Jayaweera is the lack of credibility within the Government and its senior policy advisors and executioners as well as inconsistency, incompetence and misjudgement. The barrage of criticism of course comes at a time when the economy is facing a serious crisis in terms of having to make major adjustments for the big reserves shock locally.
Given the fact that the Treasury Secretary is also a member of the Monetary Board of the Central Bank, the Jayasundera-Cabraal duo understandably is being held responsible for the mismanagement of reserves, exchange and interest rate policies as well as slippages in fiscal management.Not so long ago there were several developments which confirmed the duo didn’t meet eye to eye on some specific issues. In separate private conversations, one has blamed the other and vice versa. One has noted that some degree of disagreement between the two institutions is always good whilst they have different mandates as well. However, recently in separate fora they have complimented each other or at least haven’t blamed one another in public. The tipping point of Jayasundera-Cabraal friction was apparent when the rupee was devalued by 3% as a proposal in the 2012 Budget. This job is usually done by the Central Bank.
However, the Treasury justified the move via the Budget as a necessity, thereby implying the Central Bank had failed to do what was essential. Three months since, however, there is greater convergence between Jayasundera’s and Cabraal’s thinking and actions. “The package of measures” as described by the IMF on Tuesday to put things right in the monetary and fiscal management during the past two months appears a work of concerted joint action and has been welcomed by the multilateral lender. Jayasundera and Cabraal have also credited themselves or their respective institutions individually or collectively for some of the past and recent most achievements.
The issue is whether the country could have avoided policy mistakes costing billions of rupees had there been a greater collective responsibility between the Treasury and the Central Bank after foregoing their individual egos.
Some would say better late than never. True, but apart from the cost of adjustment and correction, the entire mismanagement phase triggered a more dangerous issue of policy inconsistency.
The end of the war provided the country an unprecedented opportunity. In the same vein Sri Lanka has also equally lost or failed to harness many positive opportunities for growth and reforms that have come by during the past three years. The country’s Chief Executive President Rajapaksa, as some allege, has played ball with regard to the friction between his Treasury Secretary and Central Bank Head. Whether it is to improve the competence of the two we can’t confirm, but the onus of accountability on alleged mismanagement and policy inconsistency and their cost also falls squarely on the Minister of Finance. The blame game must end. If successive Governments in the past played ball with regard to the war which Rajapaksa decisively brought to an end, then it is also high time for the President to do the same with regard to the battle for economic development. Hold people accountable for their policy advice and actions. Failure will only result in fighting for survival and not equitable prosperity in post-war Sri Lanka.
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