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Finance Minister’s statement that “Central Bank has failed miserably on many fronts”

Comments / {{hitsCtrl.values.hits}} Views / Tuesday, 22 November 2016 00:01

By Legal Eye

According to the news item that appeared in the Daily FT on 16 November, the Minister of Finance is supposed to have stated that “the Central Bank will be restructured to ensure better execution of institution’s responsibilities and it has failed miserably on many fronts”.

It is most astonishing that the Minister of Finance could make such a serious statement about the Central Bank, an institution which is not under the purview of the Ministry of Finance. 

In the Gazette Order made under Article 44 of the Constitution of the Democratic Socialist Republic of Sri Lanka and published in the Gazette Extraordinary No. 1897/15 – Sunday, 18 January 2015, relating to the assignment of powers and functions of ministries, the Central Bank of Sri Lanka is under the purview of the Minister of Policy Planning, Economic Affairs, Child, Youth and Cultural Affairs. It appears that the Minister of Finance wants to usurp the powers of the Prime Minister. 

In one sense, it could be accepted that the Central Bank has been politicised as asserted by the Minister of Finance, because the Central Bank did not initiate action against Ravi Karunanayake, the third accused when in case No. HC.4648/2009 filed in the Colombo High Court by the Attorney General at the instance of the Exchange Control Department of the Central Bank as observed in the Order of the Colombo High Court Judge Iranganie Perera made on 18 May 2015. 

By this Order, Colombo High Court Judge Iranganie Perera acquitted Finance Minister Ravi Karunanayake and two others on charges of money laundering and of violation of the Exchange Control Act on the basis that the charges framed against the accused did not comply with the Exchange Control Act, but made order in the last paragraph of the said Order that Attorney General has a legal right to file a fresh indictment against the three accused for the contravention of the aforementioned laws. The provisions of the relevant laws required institution of such an action on or before the expiry of one year from the date of the Order i.e. before 17 May 2016. 

Had the Central Bank been apolitical it should have informed the Attorney General to consider the institution of a fresh case when the three accused in the aforementioned Case No. HC.4648/2009 filed in the Colombo High Court were acquitted purely on a mistake of a technical nature and permitted the Judiciary to decide whether the accused were guilty or not guilty of the charges framed against them which would have been similar to the charges framed in the earlier case, but without technical errors.

Exchange control as well as the monitoring of money laundering activities are functions of the Central Bank. Further, the Secretary of the Ministry of Finance is an ex-officio member of the Monetary Board – the governing body of the Central Bank. 

Regarding the desire to improve the stature of the Central Bank, the President and the Prime Minister should give due consideration to amend either the 19th Amendment to the Constitution of the Democratic Socialist Republic of Sri Lanka or the Monetary Law Act to make provision to the effect that the Governor of the Central Bank who is the Principal Executive officer of the Central Bank, by the Constitutional Council on the recommendation of the Prime Minister, as in the case of the appointment of the three appointed members to the Monetary Board – the governing body of the Central Bank.

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