Cambridge-educated Dr. Indrajit Coomaraswamy was in semi-retirement when the call came to run Sri Lanka’s Central Bank.
The Central Bank was in total crisis. Other than the former PM Ranil Wickremesinghe, no one else wanted Arjuna Mahendran reappointed as CB Chief again. The Government was in turmoil, the country needed a credible candidate to run the Central Bank, preferably one with a credible reputation.
The late Saman Kelegama, Dinesh Weerakkody and Lalith Samarakoon and insider Nandalal Weerasinghe were the front runners for the Job according to a Daily Mirror report at that time. To the surprise of everyone – including Coomaraswamy himself – the President appointed Coomaraswamy who was not even in the running to become the Central Bank Governor.
Who recommended him to the former President, a man who knew nothing about the Central Bank, is still a mystery. The fact is the self-effacing civil servant has now given a country that was on the edge of bankruptcy a new lease of life. He has very admirably restored the credibility of the bank and brought professionalism back to the institution. The next Governor (hopefully a qualified professional) whoever it may be, should start from where Dr Coomaraswamy ends his chapter.
Dr. Coomaraswamy is 70 and it is speculated that the 70-year rule that is applicable to the banking sector is being voluntarily practiced by the outgoing CB Governor. Or was he asked to leave by the new administration to put in their crony? If it the latter, it is stupid on the part of the new administration. No one wants the Central Bank to go back to the dark days when the Central Bank became an executor of political decisions of the administration and controversial decisions were on top of the CB agenda.
Central Bank governors play a pivotal role in decisions about economic policy, even when they are part of a board or committee, and even when central banks are not fully independent. For example, as chairman of the Monetary Board, the CB Chief is responsible for the conduct of monetary policy. Coomaraswamy’s credibility, bolstered by his experience in the financial sector and the private sector, was key for his success in bringing credibility back to the institution, after Mahendran’s disgraceful exit.
The role of the Governor of the Central Bank extends well beyond controlling inflation even sometimes tempering the political orientation of the Government towards the economy. Coomaraswamy did just that for the benefit of the government and he did it with top marks according to CB sources, unlike the politically appointed governors, who interfered from the appointments of directors in public and private banks to lending decisions in banks or to praise publicly the Government’s decision and the leaders in power.
He refused to allow politicians to use the EPF to either bump up the stock market or to influence the private sector banks, saying the Central Bank had no moral right to use the EPF to influence the decision making process in private banks. He depoliticised the bank to such a level that the Central Bank after a decade began to act as a true economic policy advisor to the Government.
The professional background and conduct of Central Bank governors have enormous influence over the entire financial sector. In particular, experience in the private sector helps to understand how the private sector operates. Experience in international organisations matters too.
Coomaraswamy had all that and he used it to provide leadership to depoliticise the institution. He wasn’t a rock star, though he spoke the best English in the former administration. He did not like the spotlight, as was the case with some of the previous Central Bank Governors.
What he did was to make good professional decisions at the right time based on data and he flatly refused to execute politically motivated decisions. By that he returned integrity to the Central Bank and to the Government internationally. Hats off to him – he served the Central Bank with dignity and honour.
President Gotabaya would do well to retain a gentleman like Dr. Coomaraswamy as his Governor and honour his commitment of bringing capable technocrats with credibility to run his administration. The nation’s economy will certainly be in safe hands if Dr. Coomaraswamy continues for a few more years and people will see the real benefits of his sound fiscal management.
As a Royalist I happy that someone has finally overshadowed many of the rascals in politics and lived up to our motto.