“Former Governor of the Central Bank Ajith Nivard Cabraal is a politician more over a minister in the present government. It is very clear if you are a politician or a minister you cannot be appointed to become the Governor of the Central Bank,” says the former State Minister of Finance and member of Parliament Eran Wickramaratne.
Commenting on the report that the Governor of the Central Bank has resigned, Wickramaratne said “But our concern is that a former Governor of the Central Bank may be appointed and if there is any truth in it, it is totally unacceptable”
Wickramaratne, addressing the media at his political office at Kirullapone yesterday, said that Central Banks are always independent of the government and they are not a government department. Their primary responsibly is to look at the stability of the financial system, and secondly, it is to make sure that inflation is under control. Therefore, the CBSL needs to have the independence to ensure these policies.
The former Governor of the Central Bank is a politician – more over a minister – in the present government. It is very clear if you are a politician or a minister you cannot be appointed to become the Governor of the Central Bank. Usually a very experienced official from the bank can aspire to be appointed. If an outsider, he should have the relevant economic and monitory economic backgrounds. Some might believe that by resigning from the ministerial post, a politician can then become the governor of the CBSL. It cannot be done as this presents a conflict of interest. That makes it unethical. There has to be a cooling of period before such an appointment is made.
The Presidential Commission of Inquiry on the Bond Scam required that a forensic audit on the transactions be conducted; this audit took place between January 2002 and February 28, 2015. There are five Forensic reports done by reputed institutes such as PDO and KPMG. These reports discuss this conflict of interest where many members of Cabraal’s family were in various financial institutions during the time Cabraal was the Governor. It reveals a potential conflict of interest noted between July 2006 and Jan 2015. Dr. W.A. Wijewardena, a retired Deputy Governor confirmed the conflict of interest. Mano Ramanathan revealed to the Forensic Committee that no declaration was made to the Monetary Board about the conflict of interest, as is required by the law.
Under this context Cabraal is highly unsuitable to be the Governor of the CBSL. I, as Minister of State for Finance could not follow up on these reports, as they government investigation and the revelations that emerged from the Forensic Audit reports about Cabraal’s involvement did not come out until 2019. But this government has tried to sweep these reports under the carpet. But this is unethical. These are forensic audits that were conducted under a Presidential Commission and they must be investigated.
In addition, he referred to the February 2021 sentencing of Imaad Shah Zuberi, who is now serving a 12-year prison sentence after being tried by the US government for for illegal lobbying and campaign contributions. Zuberi was hired by the GoSL in 2014 for an image-building project in the USA. The GOSL agreed to pay Zuberi USD 8.5 million. We have since paid him USD 6.5 million, although we have received nothing from Zuberi.
Wickramaratne asked who paid this money. Although this payment must be approved by the Cabinet or by the Government, there was no such approval. Instead, it was paid by the Central Bank. Wickramaratne asked several questions of accountability: Who in the CBSL was responsible? Did the Monetary Board knew about it? The then Governor of the Central Bank is responsible, and this must be investigated. How can a government even consider appointing a person like that again as the governor of the central bank? Wickramaratne emphasized that a country is more important than an individual. Commercial banks, international agencies, and rating agencies will be concerned about this appointment. Wickramaratne expressed his confidence that the government will make the right decision.
In the meantime, Wickramaratne also said that the government has imposed a 100% cash margin when opening letters of credit (LC) on over 600 items including mobile phones and computers describing them as non-essential goods. But addressing the media at his political office at Kirullapone yesterday, Wickramaratne said that when he inquired from two banks, they said that even with the 100 % margin it is impossible to open an LC because they don’t have the dollars. The Central Bank is not issuing dollars to the commercial banks which is essential to pay for an LC.
This restriction of the 100 % margin will again help the cronies who are major importers to monopolize the market. It is not only that they can afford to keep the required margin from their saving without additional cost of finance, they might even have the dollars to meet the needs. Normally there is no interest accrued by the importers on the deposits made for an LC, and as a result the SMEs in the country will find extremely difficult as they don’t have the savings to keep the required 100 % margin and many will most likely be thrown out of this business. As a result of this new regulation by the government to save its face from the shortage for dollars, it will increase the prices of these goods.
The list – which could be considered as a virtual ban – includes mobile phones, computers, and over 600 other items declared as non-essential goods by the government. Ours is the only country where students have the most number of “Home -days than the School days” as the government is keeping our kids at homes due to pandemic. Amidst this, mobile phones and the computers have become essential goods to learn online.
“The critical matter is the CBSL will not sell dollars to banks to pay when the LC becomes due. This is the big problem faced by the commercial banks. There is a dollar shortage in the country.What is the government doing about it? What kind of policies is this government is pursuing? Are they taking the people back to the dark eras of queues and shortages? So this is an absolute nonsense,” declared Wickramaratne.
Wickramaratne emphasized that the real issue is a dollar shortage and we need to address that primary issue as a country, if we are to come out of this problem. (By MAH)