Treasury continues to default Central Bank

The Treasury has blatantly and repeatedly violated section 89 of the Monetary Law Act over the last decade, failing to settle the loans temporary obtained from the Central Bank (CB), an Opposition Party legislator alleged.

“In 2010 and 2011 the unpaid advances by the Treasury stood at Rs.78 billion and Rs.95 billion. I also found out that last time these advances were settled was in 2003. Since then the Treasury has repeatedly defaulted the CB,” United National Party Parliamentarian and economist Dr. Harsha de Silva said.

According to the section 89 of 1949 Monetary Law Act of No. 58, the government/the treasury can obtain temporary advances from the Central Bank. But the treasury must ensure that they be repaid within a period not exceeding six months. Further, the total amount of such advances outstanding at any time shall not exceed 10 percent of the estimated government revenue for the financial year during which they are made.

“I agree with the President for obtaining loans for development, but must also tell that unless these borrowed monies are not channeled for commerciallyviable projects, we will have to suffer from higher inflation and devalued rupee. The real economic hit-men are the ones who siphoned off these funds to politically-motivated projects,” he quipped.

De Silva further questioned another move by the government to waive off the CB of Economic Service Charge (ESC) which will result in losing an income stream so far received by the government.

“Tell us what is expected of this because I do not see any logical reason as to why you are going to stop an income stream for the government, particularly from an institution in the magnitude of the Central Bank. The Central Bank does not lose anything due to this tax. I urge the authorities to continue to tax the monetary authority as it helps the people of this country.”

In 2010 and 2011, the CB has paid Rs.95 million and Rs.120 million respectively as ESC to the Treasury.

“I do not see any logic in why you are trying to stop Rs.120 million revenue to the Treasury from an institution which earns a profit of Rs.46 billion (in 2011),” he remarked.