Unveiling ‘Road Map: Monetary and Financial Sector Policies for 2019 and Beyond’, Sri Lanka’s Central Bank Governor Dr. Indrajit Coomaraswamy said that the Central Bank, assisted by legal experts from the International Monetary Fund (IMF), is in the final stages of drafting the revisions to the Monetary Law Act (MLA), which will address long standing concerns, such as the focus on non-core and quasi-fiscal activities, monetary financing as well as limits to Central Bank autonomy by way of clearly demarcating the powers and functions related to monetary policy.
Following is the specific statement:
“Let me elaborate on a few important areas in relation to the progress towards flexible inflation targeting (FIT). Last year, we highlighted the need and the importance of strengthening the existing mandate of the Central Bank to perform its key tasks related to price stability. It is widely accepted that a strong legal mandate is an essential prerequisite for the successful adoption of FIT as it is considered the linchpin that holds the entire framework together. Hence, as an important step, the approval of the Cabinet of Ministers was obtained in principle to introduce comprehensive amendments to the MLA, particularly in the areas of strengthening Central Bank independence and facilitating the adoption of FIT as the monetary policy framework, in addition to other amendments to improve governance of the Central Bank, strengthen financial sector oversight and also to boost fiscal-monetary coordination. “Accordingly, the Central Bank, assisted by legal experts from the International Monetary Fund (IMF), is in the final stages of drafting the revisions to the Monetary Law Act (MLA), which will address long standing concerns, such as the focus on non-core and quasi-fiscal activities, monetary financing as well as limits to Central Bank autonomy by way of clearly demarcating the powers and functions related to monetary policy.” “In addition, the remit of price stability will be elevated to the status of the prime objective of the Central Bank. The revised legislation will also facilitate institutional arrangements for setting inflation targets and improvements to monetary operations, as well as macroprudential tools. These legislative amendments would not only improve the overall focus of the mandate but would also boost the credibility of the Central Bank through an enhanced governance framework and autonomy as well as greater accountability and transparency of the Central Bank. We expect to submit the amended MLA to the Cabinet of Ministers and the Parliament for approval this year.”adaderana business