Addressing the Myths

1. Is there no coordination between the Central Bank and the Government?

Coordination between monetary and fiscal authorities remains essential. The Central Bank Act (CBA) ensures this through the establishment of a statutory coordination council. CBSL works closely with the Government, international financial institutions, and other regulators, particularly in the areas of crisis management and financial system oversight.

2. Is the CBSL beyond Sovereignty and accountable only to external agencies?

The CBA provides a robust framework to ensure the CBSL’s accountability to Parliament and, ultimately, to the people of Sri Lanka. Ministry of Finance shares responsibility for setting the inflation target. CBSL also serves as the government’s representative in fostering international relations with institutions such as the IMF.

3. Is the CBSL’s financial independence a new concept?

The CBSL’s independence is not entirely a new thing, but it has been significantly strengthened under the CBA. Even under the MLA, the CBSL was vested with a high degree of financial independence. 

4. What can the CBSL truly deliver?

Core objective is to achieve and maintain domestic price stability, also tasked with securing financial system stability. CBSL’s role is to create an enabling environment of stability, within which the Government and other authorities can implement growth-oriented policies. Under the current flexible exchange rate regime mandated by the CBA, the value of the Sri Lanka rupee is determined by market forces.

5. The Central Bank’s role in conducting agency functions

CBSL has been entrusted through various statutes with the responsibility of carrying out various agency functions on behalf of the Government. This has arisen due to the public trust, as well as the absence of other acceptable institutional arrangements.