STG who became SDG of the Central Bank

 Young couple married in Oxford in 1959

Conversations with Sri Lanka’s Top Economists 2

A hard taskmaster as Director of Economic Research

When Dr. S.T.G. Fernando, fondly known as STG, was appointed as Director of Economic Research of the Central Bank in 1979, his fame – or perhaps, notoriety – as a hard taskmaster had travelled to us in the Department before he made his physical presence there. We were both awed and frightened. But, that feeling of unease was to be put to rest after he had his first staff meeting. The soft-spoken STG told us that he valued ‘quality work’ and ‘on-time delivery’ more than anything and solicited our cooperation to restore the old glory to the Department. It was also a soft threat that if we did not deliver, we had to find a career elsewhere in the Bank. 

Like his normal routine in work, his meeting was brief and to the point. He had known the old hands in the Department but went around the table before he concluded the meeting to learn about us – the new faces – who we were and where we worked.

Two tasks to be delivered within a month 

After the meeting was over and when everybody rose to leave, he asked me to stay behind. I was puzzled because I was just a junior economist in the Money and Banking Division at that time. He pulled the memo pad on his table, jotted something and gave it to me. “You’ve one month’s time to do this,” he said before dismissing me abruptly. When I read the memo outside his office, I was really panic-stricken. He had given me two tasks and I was a greenhorn in both. One was to broaden money supply from the hitherto used narrow money to broad money. The other was to propose a mechanism to use monetary base for designing monetary policy in the Bank. I knew that I would not have mercy from this lean-bodied soft-spoken man if I failed. Hence, I worked day and night, completed both tasks and delivered the results to him before the deadline.  

To my dismay, he was not visibly surprised at all. As if to compensate for his outwardly rude behaviour, he spoke to me in a friendly tone. He said that they were the very first tasks he had been given by Governor Warnasena Rasaputra when he was posted to ERD. He promised to tell the Governor who the author of the two documents was.

An ingenious method to monitor the work of officers 

Later, I learned why he was not surprised. He had monitored my progress and others as well, unknown to me or anyone else, by employing an ingenious method. In that old technology era, all reports which we produced had to be typed on old manual typewriters and to do the job, a special typing pool had been set up in the Department. He had instructed the head of the typing pool to make an extra copy of all documents typed and give him at the end of the day. When he read through those extra copies leisurely at home in the evening, he knew exactly where I was on the project. From that day onward, STG became my Guru and mentor.

Meeting STG on social media

Some 10 years ago, STG took permanent residence in Sweden to live with his family. Since then, he was in constant conversation with me via email and Facebook Messenger. These conversations were on such topics as global developments, emerging political and economic scenario in Sri Lanka, changes in the Central Bank and so on. I had learned of his economic thinking, philosophy, ideals and work habits through face-to-face interaction when he was in the Bank. At that time, he was an uncompromising disciplinarian and hard taskmaster. But, conversations through social media showed me how gracefully he was ageing and viewing the world from an entirely different perspective.

The school education

I used the same social media platform to learn about his childhood, education, family, etc. “My father was a postmaster and both my parents were fully conversant in English,” he wrote back to me. That family background had helped him to master the language, in addition to his receiving instructions in English medium at St. Thomas College at Mount Lavinia. 

His school career had been exemplary winning class awards and subject prizes throughout. “One unique incident in my memory was receiving the class prize from Lord Soulbury, the Governor of the Colony,” he told me without showing emotions in his voice. I had noted that, despite his receiving education in English medium, he was bilingual and had a superb knowledge of Sinhala better than many of us. I asked him the secret for that. 

“At St. Thomas’, we had two excellent Sinhala masters. One was Dr. Vini Vitarana who later became Professor of Archaeology at Vidyodaya University. The other was Arisen Ahubudu, the well-known poet, lyricist and dramatist. Both of them took us through the hardcore of Sinhala grammar,” he said.

To Cambridge via Peradeniya

STG had left St. Thomas in 1953 after doing his university entrance examination. “My performance at this examination was so high...” he began to elaborate. “...that I was offered a Commonwealth scholarship to study economics at Cambridge University. But the admission date had already lapsed and I couldn’t join Cambridge in that year.”

“Therefore, in the interim, I joined Peradeniya University. In view of my high performance at the entrance exam, I was allowed to proceed direct to the second year to do an honours degree in economics. However, I couldn’t continue at Peradeniya because in the following year, I got admission to Cambridge. This in fact changed my destiny.”  

STG was a strict disciplinarian too. When an incident involving malpractice in examinations was brought to his notice, he removed the entire senior management of the Institute and got a team of dynamic officers to run the Institute in the interim.

From Cambridge to Manchester

“I got a placement in Corpus Christi College of Cambridge Uni to do economics tripos. I got opportunity to study economics under such great economists of the day like Dennis Robertson, Joan Robinson, Nicholas Kaldor, R.F. Henderson, and R. Kuhn. My contemporaries at Cambridge were equally impressive. Among them were Amartya Sen, Jagdish Bhagwati, and Pai Panandika from India and Lal Jayawardena from Sri Lanka. Based on my performance at Cambridge, I was offered a scholarship to do a Master’s degree in economics at Manchester. I submitted a dissertation on ‘An Analytical Account of Export Taxation’ under Will Peters in 1959 for this degree.”

The year 1959 had been an important landmark in STG’s life events for another reason. He had fallen in love with a Swedish girl Gunilla and they were married in that year at Oxford where this girl was based. They celebrated the 60th anniversary of their marriage in 2019. 

Joining the Central Bank 

In 1961, STG returned to Sri Lanka and joined the newly-established Insurance Corporation as a statistician. But, that stint in his career was short-lived. His destiny was changed for better when he met Dr. Gamani Corea, the then Director of Economic Research at the Central Bank. “Corea convinced me that I should join the Central Bank and I accepted that advice,” he told me. “That was how I got landed in the Bank in 1963. Based on my postgraduate qualifications, the Bank placed me on a higher salary point. I was posted to Public Finance Division as an economist but soon became its head.”

Doing a DPhil at Oxford under John and Ursula Hicks

STG then proceeded to Oxford University to do a doctorate on a two-year Central Bank Scholarship. It was a suicidal mission because at least two and a half years were needed to complete a doctorate at Oxford. “But I took the challenge and joined Linacre College. My supervisors at Oxford were Sir John Hicks and his wife, Ursula Hicks. I wrote a thesis on ‘Patterns of Investment and Growth: Central Government Expenditure’ for the DPhil Degree and got the degree in two years,” he elaborated. 

Sir John Hicks was one of the leading economists in the 20th century with a number of economic theorems named after him. In recognition of his contributions, he was awarded the Nobel Prize for economic science in 1972. 

 

Serving the Ministry of Trade

After returning to Sri Lanka from Oxford, he worked in numerous capacities in the Central Bank, mostly in economic research area. He had earned reputation as an expert in trade, public finance and public debt. In 1971, he was released by the Bank to serve the Ministry of Internal and External Trade as its Senior Assistant Secretary in charge of economic affairs. 

It was in fact a difficult task for him because he had to serve a government with a socialist leaning without compromising his beliefs in market principles. During this period, his services were co-opted by the government to serve as a member of the Special Commission on Agency Houses and Broking Firms which had been managing the plantation industry as a monopoly management agent for centuries.

“Its report was a controversial document,” he admitted to me. “But we found a number of malpractices by these agency houses to the detriment of the country’s tea industry. Our recommendations led to making far-reaching changes in the tea industry, its ownership and tea sales.”

A trying period at ERD 

In 1973, STG returned to the Bank and was posted to its Public Debt Department first as its Deputy Head and later as its Head. This was the position he held when he was handpicked by Governor Rasaputra to lead the brain of the Bank, Economic Research Department, as its Director, popularly known as DER. STG was in this position only for two years but it was a busy period for all of us. We used to receive office memos jotted down in his neat handwriting practically every day, asking us to complete research reports on numerous topics. 

With this renewed research program, he was able to update the publication of Staff Studies which had gone into arrears for many years. That was an era of transition from a controlled economy to a market-driven one. With an increased public expenditure program, Sri Lanka had gone into difficulties in bridging foreign funding, on one side, and elevation of inflation, on the other.  

STG retired from the Central Bank in 1995 after serving that institution for 32 long years. I asked him about his general feeling about the Bank. “I’m happy about my work at the Bank,” he said. “It was a challenging period, but I stood up to the challenge. I as SDG reorganised the Bank, re-established the practice of having monthly meetings with Heads of Department, promoted research in the Economic Research Department, sent officers abroad to acquire new skills and talents and helped Governors to convert the Bank into a truly professional institution. How can a man be unhappy when he has done all these things in his career?” He threw the question back to me. 

 

When inflation began to rise to double digit levels and did not show any sign of abating, we all had to work round the clock in monitoring credit levels and submitting special reports to the Monetary Board practically every day. For the first time in its history, the Bank had introduced quantitative credit controls which had to be monitored daily. STG had to give leadership to these extraordinary measures taken to control inflation in the country.

Heading People’s Bank

He was once again disturbed in his duty when the Government in 1981 requested the Central Bank to release him to People’s Bank to function as its Chairman. “I served the Bank as its Chairman for seven long years till 1988,” he wrote to me. “It was a politicised institution and unions were very powerful. I was like an acrobat walking on a tightrope. If I had leaned myself to either side, I would have fallen. But I managed to bring the Bank to a sound position by carefully managing both the unions and outside lobbying groups.”

SDG at CB

In 1988, he returned to the Central Bank as its Deputy Governor and soon he was designated by the Monetary Board as Senior Deputy Governor or SDG. There was only one Deputy Governor and, therefore, it was a solo-affair for STG. I had to work very closely with him during this period in a number of capacities. 

Upgrading Institute of Bankers

STG was the Chairman of the Institute of Bankers of Sri Lanka and I was its Director of Studies handling the entire academic program. The Vice Chairman was H.M.R. Ellepola, an Executive Director of the Bank. Three of us built the Institute together from a scrap to a vibrant academic body with more than 18,000 students. STG introduced the annual convocation system to recognise the students who had completed the Institute’s examinations in front of their parents and banking bosses.  STG was a strict disciplinarian too. When an incident involving malpractice in examinations was brought to his notice, he removed the entire senior management of the Institute and got a team of dynamic officers to run the Institute in the interim. 

Establishment of CRIB

In 1990, under Central Bank’s leadership, Credit Information Bureau, commonly known as CRIB, was set up. STG was its founding Chairman. He handpicked me as the founding General Manager and my job was to establish the country’s credit information system under his direction. I recall that he was particular about keeping the expenditure of the new outfit at a minimum. To set an example, he got the Board to resolve at its very first meeting to forego directors’ fees. CRIB was soft-opened in August 1990 and the deadline given to us was that the first credit report should be released before the end of the year. 

It was another hard period for all of us in CRIB to work day and night to meet the deadline. The work involved was enormous. Computers had to be acquired, software had to be developed, credit information had to be collected and information had to be digitally collated for issue to member lending institutions. We had a dedicated team of officers, some released from the Central Bank and others recruited directly from outside to do the job. These dedicated workers did not want to disappoint STG and working together, they managed to issue the first credit report one month before the deadline.

Reminiscences about CB

STG retired from the Central Bank in 1995 after serving that institution for 32 long years. I asked him about his general feeling about the Bank. “I’m happy about my work at the Bank,” he said. “It was a challenging period, but I stood up to the challenge. I as SDG reorganised the Bank, re-established the practice of having monthly meetings with Heads of Department, promoted research in the Economic Research Department, sent officers abroad to acquire new skills and talents and helped Governors to convert the Bank into a truly professional institution. How can a man be unhappy when he has done all these things in his career?” He threw the question back to me.

A man with a wife, three daughters and two dogs 

I asked him about his present life and his children. He said: “All my daughters studied at Ladies College, Colombo. The eldest one is a Chartered Accountant cum Management Accountant and lives in London. The second daughter is a medical doctor and lives in USA. The third one is also a medical doctor and lives in Sweden. I live with my wife Gunilla in Sweden. My popular pastime is reading books, writing short stories and petting my two dogs.”

I thought to myself, what else can an octogenarian like STG expect from life?

(The writer is a former Deputy Governor of the Central Bank of Sri Lanka and can be reached at [email protected].)