By Chandra Jayaratne –
Civil Society breathed a sigh of relief post “January 8th 2015 Change” and looked forward to commitments of Transparency, Good Governance, Rule of Law and Ethical Conduct of Leaders, returning, being respected and strictly complied with in governance.
The resignation midterm of the last Governor was indeed good news. The expectations were high upon the new appointee to serve the balance term being an ex- Central Banker, with requisite experience to give leadership to this important public institution. This view prevailed, despite Civil Society urging the consideration of a more recently retired Central Banker to be the choice. In any event, the civil society expected greater transparency, focus on delivering core accountabilities, assurance of effective macroeconomic governance, financial stability, effective disclosure, independent and integrity driven decision making and policy directives, coupled with giving independent advice to the government to be the core values driving the Central Bank. These expectations were to supplement assuring an end to the use of the Central Bank and its resources and policy making powers, to further political and personal objectives and seeing an end to conflicts of interest driven pump and dump style management of public resources of the EPF and suspect practices in long term bond issues.
Civil society, reflecting on the outcomes of Central Bank governance over the past 15 months can only conclude that their hopes have been dashed and that the governance platform and results realized are no better than under the previous regime. The new Governor must take total responsibility for this situation, as he has failed to live up to expectations of society.
Civil society had a rude awakening to the truth of good governance, upholding rule of law and transparency sans conflicts of interests under the leadership of the new Governor, when the dirt from the long term bond issue of 27th February 2015 hit the fan. This shock was compounded many times over, when a Committee of party affiliated lawyers,(with little or no understanding of securities market operations, long term bond issues and best codes of governance and fund management) issued a report white washing the key compliance and control weaknesses as well as deviations from best practices of governance. A civil society move to enforce a fundament right to have the systems, procedures, independence of professional decision making, compliances and control frameworks, etc, being independently reviewed by experts in setting a frame work for the future, was also frustrated by the spend of millions of state funds as professional fees on cleaver tactics adopting legal counsel. The final nail in the coffin was the COPE report being tactically delayed and parliament dissolution used to have its tabling frustrated.
What flowed from above strategically bowled doosra’s was to cleverly target and knock out essential change management within the Central Bank, and block the adoption of effective codes of conduct for bond issues and allow secondly market transactions involving state funds a free range operations with non transparency. The non transparent practices prevailed alongside probable continuing conflicts of interests amongst related parties. The civil society demands were effectively blocked by the Governor and Monetary Board and have purportedly laid a foundation for the continuation of non transparent and purportedly conflicts of interest embed long term bond issues to be made up to even the end of April 2016. The highly questionable long term bond issues are those auctioned on 8th January 2016, 5th February 2016, 29th March 2016 and 31st March 2016.
The impunity of the Governor and the Monetary Board, and their “lack of shame and fear “ before civil society can be assessed from the following replies of the Secretary of the Monetary Board to issues raised in correspondence:
- Interpreting Article 14A of the Constitution regards right to information of citizens “The intention of Parliament appears to be to that in order to exercise the right to access to information, such right shall be provided for by law”.
- “Though the Right to Information Bill has been presented to the Parliament on 24th March 2015, so far the Bill has not been enacted by the Parliament to give effect to the rights created by Article 14A of the Constitution”
- In response to the request for information relating to long term bond issues already made involving state operated funds including Employee funds under trusteeship management by the Central Bank, invoking the provisions of the RTI Bill refuses access to information stating “disclosure of such information would cause serious prejudice to the economy of Sri Lanka by disclosing prematurely decisions to change or continuing government economic policies relating to, inter alia, the regulation of banking or credit” (emphasis added) (A shameful and fearless act of impunity, with misrepresentation of facts, arrogance and misuse of power, disregarding the commitments to transparency, good governance and upholding rule of law. In this context civil society is aware that no such dangers of premature negative impact are applicable as the bond issues have been made already.
- In the Daily FT article dated 12th May 2016 tilted ‘CB Chief Mahendran rebuts Insider; sets record straight the Governor “shamelessly and fearlessly and with impunity ”states;
“The issue of the bond issue of 29 February 2015 was taken up by the Supreme Court on 13 May 2015 (SC FR No 107/2015) and all charges against me and other dependents were dropped.”As a petitioner to Court, I can vouch that the petition did not charge any person in specific nor demand neither a reversal of decisions made nor penal sanctions against the Governor and dependents. Petition prayed only for a review of systems, procedures, independence of professional decision making, compliances and control frameworks, to be independently reviewed by experts in setting a frame work for the future. Therefore the Court had no opportunity to drop all charges against Governor and other dependents and it merely ruled that there appeared no legal basis to proceed.
“On the question of the issue of Government bonds in 2016, the Monetary Board of Sri Lanka has investigated the issue surrounding recent bond auctions and will publish its findings shortly.” Civil society however wishes an independent transparent review by competent professionals with requisite knowledge and of course unquestionable integrity.
“Key features of recent reforms include implementing a market-determined system for the determination of interest rates and exchange rates in Sri Lanka.” Civil society demands conflict of interest and related party interests free, transparent, professional best practices embedded, adequate controls and compliant processes driven, market transactions, conducted by professionals with independence of judgment and highest integrity.
In addition civil society faults the present Governor and Monetary Board for having failed in their direction and oversight of operations and financial affairs of the Central Bank, by incurring significant losses from operations, endangering the stability of the Central Bank, due to such losses significantly reducing the reserves of the Bank.
The Central Bank Governor has on many recent occasions during public presentations avoided responding effectively to questions and resorted to passing the accountability to respond to other senior staff and have even maneuvered by diversionary tactics failed to respond to the real issues raised with the real issues being side tracked. Several such questions and responses were evident during the recent Central Bank public presentation of the Annual Report 2015.
To top it all comes a report of a purported high value claim as a reimbursement under a clothing allowance by the Governor, which if it be accurate, is a misuse of office and a slap on the expectations from leaders committed to good governance.
Central Bank as the Regulator of Banking and Finance businesses stipulates that only persons who are “fit and proper” can hold positions as directors and Chief Executive Officer of Banks and allied regulated bodies. All covered persons must complete and submit a declaration in terms of “Direction on Assessment of Fitness and Propriety of Directors and Officers Performing Executive Functions.” Should therefore, such declaration made by the Governor be placed transparently for viewing by public, before his appointment, which appointment must, whether provided for in the Constitution or not, be placed for consideration by the Constitutional Council.
In the light of the controversies and criticisms surrounding the leadership role and discharge of duties without conflict of interest s in keeping with highest standards of conduct expected from such office holder, strictly within the values and norms framework committed to by the President and this government, should not the voice of advocacy of civil society raise a strong amber light warning, targeting the President and the Constitutional Council to thoughtfully reflect prior to the extension of the current term of the Governor, said to end in June 2016.