Mass Media Minister Dr. Bandula Gunawardena said in Parliament yesterday that Sri Lanka has experienced three economic crises in 22 years. The first in 2001. The deficit in the Budget continued. The economy collapsed again in 2020 under the Covid pandemic. By 2022, for the first time in the history of this country, the economy moved backwards by seven percent.
“All sectors, including the agriculture industry, have collapsed. Unfortunately, this Parliament has been unable to implement the Fiscal Management Responsibility Act in the way by which we can come out of this crisis. We can have different arguments about this. It is not possible to fulfill this responsibility technically and economically. This crisis has made a country bankrupt today because Parliament is not able to fulfill the responsibility of public financial management. For that, not only Parliament, but also the Finance Ministry, the Central Bank and the Monetary Board are also responsible for the people in the country,” the Minister said.
According to Section 28 of the Monetary Law Act, the Central Bank has the power to control the entire commercial banking system in the country. Neither the Finance Minister nor anyone else in Parliament can do anything about it. If they do that, they will say that they interfered with the independence of the Central Bank. According to Section 49 of the Monetary Law Act, the Central Bank has the monopoly to issue coins and notes. The Central Bank prints money. In 2018, the Central Bank added Rs. 796.5 billion to the circulation. Rs. 697.3 billion was minted in 2020 and Rs. 390.9 billion in 2021.
“According to Sections 86 and 87 of the Monetary Law Act, the Central Bank is the lender of last resort to all banks. The Central Bank decides the policy interest rate. These days the bank interest rate is 30 percent. According to the economics that I know, no country has developed with a single digit interest rate anywhere in the history of the world. Bank interest rates are high in all countries of the world. More than Rs. 16 billion is spent on public sector salaries. If you do not pay the money for the issued Treasury Bills, the interest will increase to 33 percent.
They advertise that if you sell property and put the money in the bank, you will get an interest rate of 30 percent. The Central Bank determines the exchange rate. The Central Bank controls foreign reserves. The Central Bank controls imports and exports. However, the houses of public representatives were set on fire. Summon the Finance Ministry and the Central Bank. This is because the lies that have been written for 75 years are brought here and read. Whether we like it or not, we read what these people write,” the Minister said.
“I have intervened as much as I can in the Cabinet and in Parliament and outside. I complained to former Speaker Karu Jayasuriya in Parliament, along with Prime Minister Dinesh Gunawardena, when the Parliament was misled by making a wrong Budget document. A new culture should be created. According to Article 148 of the Constitution, Parliament has the power over money.
There is a problem whether the Parliament has the power to exercise that power. There is a monetary system. When a Letter of Credit is issued from our country, goods can be brought to this country only if this Letter of Credit is accepted by the banking system of the world. We gave companies an opportunity to come forward to explain the recovery process when a country falls into this situation. Foreign Minister Ali Sabry testified in this regard. Twenty-eight companies came forward for this. Twenty of them did international money processing. Professor G.L. Peiris also participated in it. Lazard of France was chosen to recommend a solution to this problem by following a scoring system. After choosing Lazard, Sri Lanka gained knowledge to bring it to this state. The international company Clifford Chance is also representing the Sri Lankan Government.
They are negotiating with the International Monetary Fund. There is nothing to hide. There is no political answer in any way to get the country out of this state. There are four solutions. One is to increase the country’s income as much as possible by any means, and two is to reduce government expenditure to reduce the budget deficit to an affordable level. Three is to increase as much as possible the foreign exchange coming into the country, and four, to reduce the flow of funds out of the country,” Minister Gunawardena said.
by Daily News Sri Lanka
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