Sept 16, Colombo: The new Central Bank Act, which went into effect on Friday has limited the ability of the Central Bank of Sri Lanka to print money.
Acting Minister of Finance Dr. Ranjith Siyambalapitiya says that the Central Bank Act, passed in parliament recently making the Central Bank and its activities more independent, has been in effect since Friday, September 15.
Speaker of Parliament Mahinda Yapa Abeywardana on Thursday (Sept 14) endorsed the certificate on Central Bank of Sri Lanka Bill, which was passed in Parliament by a majority last July 20th. The Bill comes into effect as the Central Bank of Sri Lanka Act No. 16 of 2023.
Accordingly, the Minister mentioned that the Act places tighter restrictions on printing of money previously done by the Central Bank and now it can be done only under very limited and exceptional circumstances such as when dealing with a national security issue or global level health emergency.
The Minister mentioned that even under the special circumstances, only an amount not exceeding 5% of the value of the issued treasury bills can be printed.
In addition, the Central Bank must work according to an inflation target and if it fails to reach it, it has to give reasons in this regard.
The Minister points out that with the enforcement of the Act, the Treasury Secretary will not be part of the General Board of Governors and the Monetary Policy Board of the Central Bank. The Treasury will not be able to involve in the process to appoint a Governor of the Central Bank.
The Act specifies the qualifications that are required for an individual to function as the Governor of the Central Bank .It is also special that even the qualifications of those board members have been included in the new Central Bank Act and all the appointments must also be approved by the Constitutional Council.
In addition, Parliament will have the power to summon the Governor of the Central Bank and inquire about matters, the Minister further stated.