CB governor clarifies independence claim amid Parliament scrutiny

By Nuzla Rizkiya
In the wake of the Central Bank officials being summoned for parliamentary questioning over its recent assertion of independence, the Central Bank governor took to clarify the critical role of its sovereignty to maintain the country’s hard-won macroeconomic stability.
Speaking at a recent press meet, Central Bank Governor Dr. Nandalal Weerasinghe clarified that while the Central Bank is assigned with two primary responsibilities: monetary policy enactment and financial system stability, it is under the government’s purview that the fiscal policies fall.
“There are many misconceptions of the responsibilities of the Central Bank. Fiscal policies are enacted by the country’s executive. Enactment of monetary policies is the primary responsibility of the Central Bank; no other institution is held accountable for it. 

The government and Central Bank are two separate institutions of the state. This doesn’t mean we have to work separately. But fiscal policies do have an impact on macroeconomic stability,” 
he said.  
Dr. Weerasinghe added, “Given the levels of legal autonomy, it is important to enact monetary policies independently. Therefore, it is important for the Central Bank to be independent to evade affects by fiscal policies.”
Moreover, the governor clarified that the Central Bank is not a profit-making institution and the evaluation of its success solely based on financial gains or losses is a misguided practice.
“We have to clarify that the Central Bank was not established to generate profits. In fulfilling our responsibilities, the Central Bank can incur both profits and losses. Losses are accommodated by the Central Bank of Sri Lanka Act. The main focus should be whether the monetary policies were enacted effectively.”
Moreover, he urged that the successful policies and reforms implemented jointly by the government and Central Bank must continue in the 
same direction.
In doing so, the country would be able to maintain macroeconomic stability, control inflation, stabilise the financial system, increase incomes and reduce poverty, 
he said.