CB Governor Lakshman to step down on Sept. 14

• Says certain incidents over last week have shortened his service period by about six weeks
• Reveals original plan was to step down on his 80th birthday
• Says invitation to become CB Governor came unexpectedly in Dec. 2019
• Stresses he hasn’t done anything against his conscience and economic and political ideology he continues to believe in

Central Bank Governor Prof. W.D. Lakshman yesterday formally announced that he is stepping down from the post prematurely, with effect from the 14th of this month.

“My intention and plan were to tender my resignation paper on my 80th birthday in the coming month. Unpleasant events over last week have shortened my service period by about six weeks,” he told reporters in a virtual press conference yesterday evening. 

Although he was offered to represent Sri Lanka as Alterative Executive Director in the International Monetary Fund (IMF), for one year, Prof. Lakshman noted that he was inclined to decline this “attractive offer”, as it’s against his principals.

Without divulging much detail, he hinted that political and personal issues might have contributed to his premature resignation.

“There were certain political developments as well. I am not going into details of those. There are always ideological issues in any political debate but it didn’t come into this particular scenario. It came to persons (personal issues),” he said.

President Gotabaya Rajapaksa appointed Prof. Lakshman as CB Governor following the resignation of former CB Governor Dr. Indrajit Coomaraswamy in December 2019, when the new government came into power. Although he played a key role in drafting the economic policies in President Rajapaksa’s election manifesto ‘Vistas of Prosperity’, Prof. Lakshman noted that the request to accept the post of Governor came unexpectedly and he only accepted the position to provide the ideological support for the implementation of the government’s policies and objectives as stipulated in the policy document.

Prof. Lakshman often backed the policies targeting to strengthen local production, with measures focusing on import substitution while also enhancing exports.

“I realised that only a minority of economists nowadays among us subscribe to these economic perspectives; it was similar within the CB. It wasn’t an easy task,” he said.

During his tenure as CB Governor, which was overshadowed by the COVID-19 pandemic and high external debt servicing commitments, the country’s gross foreign exchange reserves fell to record lows and the country faced multiple credit rating downgrades from key international credit rating agencies, ultimately leading to foreign currency liquidity issues in the country. 

Instead of seeking the IMF support, the CB and government resorted to multiple import restriction measures, with the most recent measure coming into effect this week. 

At the same time, money supply grew substantially under the CB’s monetary stimulus and the inflation led by food inflation started to shoot up, forcing the CB to tighten monetary policy at the last monetary policy review meeting. 
“… Because of certain natural and human factors beyond our control, all the intended results were not achieved all the time. I have not taken any decisions against my conscience. There is a political-economic ideology which I believe in and continue to believe in being correct,” Prof. Lakshman said defending his actions as CB Governor.  
Prof. Lakshman, who was formerly a Professor of Economics at the University of Colombo, said that he’s returning to his academic life, following his resignation next week.

Meanwhile, former CB Governor and the current Money and Capital Market and State Enterprise Reforms State Minister Ajith Nivard Cabraal is widely expected to return as the new CB Governor, replacing Prof. Lakshman.