Central Bank Governor extols the new Monetary Law Act

The Governor of the Central Bank Dr. Indrajit Coomaraswamy says that the proposed Monetary Law Act, will strengthen stability in monetary policy.

Sri Lanka is in the process of introducing a new law governing central banking in the country in place of the current Monetary Law Act.

Amending this 70-year old law is a long-felt need, in order to update its provisions with regard to monetary policy formulation in line with international best practices, and also to introduce a strong macro-prudential policy framework aimed at preserving the stability of the financial system

Dr. Coomaraswamy stated that whenever the Government had fiscal indiscipline and was short of money, it forces the Central Bank to print money noting that effectively printing causes inflation.

He was of the view that the Central Bank should not be involved in print money and buy  treasury bills from the government in the primary auction.

He disclosed that the aim  of the proposed new monetary law act to provide provisions  that the Central Bank by law should be prevented from participating in the primary auction for treasury bills.

“The Central Bank should not print money. It should be prevented from printing money, and this would be a significant improvement in our monetary policy formulation," he emphasized.