Amid widespread calls for the removal of Central Bank Governor Arjuna Mahendran, moves are underway to affect a restructuring of the institution in order to neutralize opposition and pave the way for his contract to be renewed, Colombo Telegraph learns.
Accordingly, Cabinet is set to move the Public Debt Department, Exchange Control and control over secondary markets outside the purview of the Central Bank and place them directly under the Ministry of Finance. Furthermore, the management and administration of the EPF (Employees Provident Fund) is to come under a new company, in this arrangement.
Colombo Telegraph learns that this is the Prime Minister’s solution to save Mahendran, whose term has been fraught with poor judgment regarding policy matters as well as marked by scandals over two bond issues which saw his son-in-law Arjun Aloysius benefitting to the tune of several billion rupees.
President Maithripala Sirisena has openly stated his opposition to Mahendran, as have senior members of the Cabinet. However, those loyal to the Prime Minister such as Lakshman Kiriella and Eran Wickramaratne have defended Wickremesinghe’s stand.
Eran Wickramaratne, Deputy Minister of State Enterprise Development, in an interview on the channel “News 1st” in fact hinted on a course of action such as this, saying that the Government was considering taking regulatory functions away from the Central Bank. Wickramaratne also defended the Prime Minsiter’s position vis-à-vis the Governor, pointing out that Mahendran not been found guilty of wrongdoing.
Also at issue, however, is Mahendran’s competence as well as his chronic absenteeism and spending binges. After he took over foreign exchange reserves have fallen more than a third from their late 2014 peak of $82.2-billion to $5.6 billion at the end of May, the lowest since February 2012. This has been attributed by the IMF to “foreign outflows of around $2 billion from government securities”.