3 December, 2022


Advising Prime Minister On Selection Of The Next Governor For The Central Bank!

By Hema Senanayake

Hema Senanayake

Hema Senanayake

I suppose it is wishful thinking on my part. Still I wished if I could advise Prime Minister on the selection of a person for the appointment of the governor of the central bank after Arjuna Mahendran, assuming that he is leaving soon. If I happened to advise him on one-to-one meeting I would do so only if I am allowed to talk to him as a colleague at least for that moment. The reason is not that I have a superego; instead I want to make sure whether he got my point in correct perspective. Let me explain this point quickly before we get back to the subject matter.

One day I went to hear a Buddhist talk. The Venerable monk made a nice Dhamma sermon. After the sermon, people were allowed to ask questions. During the time for questions, I observed that many times people presented two or more views on a very unique point of Dhamma made by the monk. Later, after the session I asked the monk as to why different individuals understood differently on a same point of Dhamma. I got a beautiful answer which I will never forget.

The monk explained that different individuals understand Dhamma differently as individuals have developed something known as “Five Faculties or Five Mental Factors” differently within their minds. As such none of the perspectives submitted by each individual when asking questions were wrong, but their questions show the different level of development of their minds in regard to the said five mental factors, he said.

On a different plane the monk’s above point equally applicable to any no-commonsense subject and in this particular case it applies to central banking too. Different individuals have different level of understanding of the subject. How can I advise PM meaningfully unless I do not know as to how far he has developed his “faculties” in regard to central banking? In regard to the subject, I am the boss not him and economics, especially monetary and macroeconomics, are not common sense subjects any more. As such any economic advisor must prepare his boss privately, confidentially and respectfully, in order to tackle any issue presented or submitted to him by any official –appointed or elected- for a decision. That is why I insist that I should be able to talk to him as a colleague, in order to give him any meaningful advice.

Since, I am not going to get a chance of my choice I have opted to give my advice through media by writing this article. Who would make a good Governor of the central bank? In regard to this question perhaps PM might need an advice.

Recently, Deputy Minister Eran Wickremaratne replied to this question. He said that the person should have an economic background first. What kind of economic background should he have? Eran’s statement does not explain it. Secondly he said that, since the Central Bank is a large institution, that person should have high-end managerial capability. I am not convinced. Former Federal Reserve chairman of the United States, Ben Bernanke had been teaching in Princeton University when he got appointed as a member of Federal Reserve. After a short period he was then appointed as the chairman of the President’s Council of Economic Advisors and subsequently he was elevated to be the Chairman of Federal Reserve which is the U.S. version of central bank. Ben Bernanke had no high-end managerial capability until he was appointed to be the Head of Federal Reserve. Thirdly, Eran pointed out that the person must have clear integrity with having no conflicts of interest. I agree.

However, in regard to the same question, Dr. W.A Wijewardena who retired from the central bank as Deputy Governor has a different view. I have another view. But both of us have something in common, that is, we both suggest that the nominee must take a test. Dr. Wijewardena presents a simple test for both the Governor and board members – And they should be able to explain in plain language in public forum the difference between reserve money and money; if they cannot, they should not accept the post of Governor or the post of a Monetary Board member. Somebody told me that due to the deficiency in knowledge, they (members of the monetary board) are being led in the wrong path by CB’s top bureaucrats who too are unable to pass this test today. This is an interesting test. I have developed another test. It too, is a simple test.

First, I submit a quote from the Governor of Chinese Central Bank (Bank of China). The nominee must explain the meaning of that statement accurately. Here is the quote;

“The acceptance of credit-based national currencies as major international reserve currencies, as is the case in the current system, is a rare special case in history.” (2009, Zhou Xiaochuan, Governor of the People’s Bank of China). In this quote he was referring to the U.S. dollar.

Perhaps, readers might think as to why the members of our monetary board must understand about the creation of international reserve currency. It is because, not only the international reserve currency is credit-based, but also the creation of our national currency –the rupee- too is largely credit-based.

Therefore, I am not proposing to appoint any person as the Governor of the Central Bank, who cannot explain the true technical meaning of the above statement of Zhou.

So, finally my advice to the Prime Minister is to find a person, possibly who can pass both above tests. That person possibly would make the best candidate to be the governor of the central bank and to be the Chair of the Monetary Board.

Also, readers might note that the above mentioned tests are open book tests; hence candidates for the post of governor and for the positions of monetary board members can refer any amount of books and consult any number of teachers before they take the tests. Even though Arjuna Mahendran is supposed to leave the job soon, I invite him to take the tests. If he does public will witness firsthand as to how rationale his appointment was. Further, I invite all incumbent members of the Monetary Board to take these two tests at least privately to see your competence by yourselves.

Real knowledge related to the subject must be the key parameter in appointing the governor and in selecting members to the monetary board: but true requisite cannot be some economic knowledge and high-end managerial capability as was pointed out by Eran.

For those who do not know central banking and the critical importance of it, appointing the members for the monetary board is quiet simple but for those who understand central banking truly, the appointment of the members for the Board could be tremendously a difficult task.

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Latest comments

  • 5

    Once again I ask, who is Hema Senanayake, and what has he ever done for the Sri Lankan central bank all this time?

    Anyone can find the answers to these questions with a little research in a basic macroeconomics textbook. The last thing we need is more ‘pothey guras’ who have no clue of how the world works beyond textbooks trying to run the country. I’m sure the Oxford PPE educated Mahendran can cobble together a definition for this. Whether he can cobble together a reason for not succumbing to public will is a different question.

    It is also time to replace non-financial members of the monetary board with senior bankers or economists. I believe none of the current members have any financial services background.

    • 3

      The United Nations has tests for all its professional employees who need technical skills for a job, and so a test is a good idea for the CB employees and head!

      However, given the mess and corruption now entrenched in the Sri Lanka Central Bank, it would take someone of extra-ordinary ability.

      The Reserve Bank of India (RBI), Head, Dr. Rajan, with empecable honesty qualifications and expertise who is stepping down should, be invited to clean up the Sri Lanka Central Bank.

      Sri Lanka simply does not have professionals of Dr. Rajan’s caliber.

      The CB head should be above whispers of corruption. At the Central Bank not only must transparency and accountability be done but must also be SEEN TO BE DONE, just as justice must not only be done but must be seen to be done.

      If not for Mahendran at the scandal at the Central Bank, Ranil and UNP would win the next election because people are fed up of Sira and his gigantic Ayahapalanaya of corrupt Jarapassa SLFP stooges. But Ranil always digs his own grave!

  • 7

    All humbug! Does Ranil understand the answer? You are trying to justify politicization of C.B Governor position. We did not have this sort of huge messy and crappy situation until former strongman brought his pal; Cabral another corrupt individual from outside to fill this coveted position. My advise to dear friend Ranil, is firstly do not ever appoint friends to fulfill his personal obligations and secondly do not bring anyone from outside Central Bank. If a suitable person cannot be identified within Central Bank, I think the entire monetary system of the nation is in danger. The nation have trained all the officers working in the Central Bank at Tax payers cost. Is Senanyake is telling we have given wrong type of training to these officers at our expense. Get real and avoid mumbo jumbo lingo that Politicians do not understand.

  • 0

    I presume we have enough and more people within the central bank system who could run this organisation professionally (and honestly). Before Nivad Cabral, we have had many governors who have got elevated to this position through rank and file?? :)

  • 2

    Only thing Ranil understand is the harvard brain storming.
    Ranil has been made to look a great strategists & a political leader on paper.
    For his survival he will sell the country without the knowledge of the masses and let things happen and other to run the country for him

    This is how Ranil & the UNP came to be good runners-up at all the elections.

    In the interim I suggest invite Dr. W.A.Wijewardene and Mrs. Anila Dias Bandaranayake to bring the central bank to order.
    This will give time to look for a suitable replacement.

    • 0

      I do not know much about Wijewardene, but Anila; are you crazy or paid by Rajiv Wijesinghe or Ranil to invite (Rajiv’s sister, Cousin of Ranil) to fill this position even temporarily. To begin with she does not have what it takes to be the Top banker other than the family connections. Why there are no any other competent bankers trained at CB.

  • 6

    Where was this Hema Senanayake when the former governor of the Central Bank Nivard was responsible for awarding Rupees 2.7 Trillion (Rs 2,700,000,000,000) of Treasury Bonds and Bills to “cronies” and “accomplices” of the former government?

    Where was this Hema Senanayake when the the former Permanent Secretary of the Ministry of Finance & Treasury P B Jayasundera was engaged in numerous financial wrongdoings?

  • 3

    H Senanayake,

    “I suppose it is wishful thinking on my part. Still I wished if I could advise Prime Minister on the selection of a person for the appointment of the governor of the central bank after Arjuna Mahendran, assuming that he is leaving soon. If I happened to advise him on one-to-one meeting I would do so only if I am allowed to talk to him as a colleague at least for that moment…..”

    Dream on @#$%^&*()_+!!!!!!!!!!!!!!!! This was and is what Dayan Jayatilake too doing after he lost his underpants at Borella kanatta but RW never even looked at the stupid bugger. From that day on that lunatic developed an aversion and hate towards RW and since has been attacking him at all costs. I guess Hema too has some sort of an axe to grind with RW, and I think the most possible reason may be that RW has not been prepared to take “advise” from him!

    “The monk explained that different individuals understand Dhamma differently as individuals have developed something known as “Five Faculties or Five Mental Factors” differently within their minds. As such none of the perspectives submitted by each individual when asking questions were wrong, but their questions show the different level of development of their minds in regard to the said five mental factors, he said”

    Ah..haaa! Same thing could be said and is true of you too! In your world view money creation and reserve money… is the Gordian Knot for every CBG and in our case RW. But these days reserve money knowledge must be pretty standard knowledge becuase it is the fundamental mechanism on which the banking system in the word runs and therefore it is no rocket science for CBG becuase they must have learned about it before they become CBGs.

    I can only give you one answer to your way of thinking which is RW recently said in parliament that a government cannot run according to the whims and fancies of the Auditor Generals! The same applies to you too becuase RW operates in a totally different worldview than yours and he will decide what sort of people and course of actions need be taken to move the country’s economy forward. Had it been MARA that was the PM we will have doubts but thank God now it is RW who is managing the country we have faith in him becuase so far he has delivered us with what is possible with the limited resources he has. We are extending him every cooperation we could so that his task is made easy. By the way why don’t you go and test whether RW and AM have the knowledge that you seek in them? And finally now it is time to show that you have that knowledge by elucidating on the subject for us here!

    PS: When AM was working at CB in the past before he resigned, there was a faction in the CB that disliked and were against him. That faction includes WA Wijewardena. May be you too are on the same faction. It is this personal grudge that they reflect on the public domain too.

  • 1

    Silva, it appears that you are defending RW and AM and their indefensible positions.

    What is YOUR solution to this blatant disregard for proper procedure on the part of AM and his insider trading scam to benefit members of his family (and probably himself as well)?

    I too voted for RW and MS, but they have been a massive disappointment and the CB fiasco is just one of their corrupt moves with absolutely no effort on their part to seek forgiveness and do the right thing.

    RW is hampered by his arrogance and ego and MS by his ‘godayata magic’ syndrome, so what hope for Sri Lanka????

  • 0

    [Edited out] In what century are you living? AM has recently given an interview or two and he has answered all and more of you most idiotic questions. You clowns are living in the stone age and in Russian System where the state controls the economy, interest rates and the market. You are being a Dawal Migel Raa Daniyel because while enjoying the liberalized economy and being a citizen of a country where free market is practices you fools are jumping up and down advocating a practice adopted on in retarded countries like Russia.

    Yes I defend RW and AM because it is because of them that this economy and country is managed even at this level. Had it not been for them you silly buggers will have been starved and made to eat barks of trees following the moronic theories you advocate. You talk about AM made his family members benefit but has any single [Edited out] of you who is blaring this mutt theory traced and proved a single cent he has stolen?

  • 0

    The replacement for Mr. Arjun Mahendran, the current governor of Central bank, if he does not want to extend his contract,could be found within the organization. A seasoned economist will be able to handle this job provided there is no interference from politicians
    from both sides of the divide. We had several CB Governors in the past and they were not brought from the blues.It is only the previous govt. who politicized this position and inexperienced persons were brought in to handle this job and made a mess of it, incurring heavy debts.

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