A petitioner from Colombo five Jehan Hameed has filed a petition in the Supreme Court challenging the constitutionality of the new Central Bank act which was presented to Parliament for the first reading on the 7th of March.
The petitioner has invoked the jurisdiction of the Supreme Court under article 121 of the constitution read with rule 63 of the Supreme Court rules of 1978 against the bill titled “Central Bank of Sri Lanka Act”.
He says that many clauses included therein are inconsistent with the provisions of the constitution and requests the court to declare that it has to be passed at a referendum by the people in addition to obtaining a two-thirds majority in Parliament
A salient feature of the bill is to empower the Central Bank for the first time in Sri Lanka with administrative and financial autonomy which should be respected at all times and no person or entity shall cause any influence on the Governor of the Central Bank or other members of the Governing Board and Monetary policy Board or employees of the Central Bank in the exercise and performance and discharge of their powers, duties and functions under the act or interfere with the activities of the Central Bank.
However, he has listed out many clauses that seemed inconsistent with the constitution.
Accordingly, the following clauses (inter-alia) of the Bill, namely;-
- Clause 5 which creates the Central Bank as an autonomous body;
- Clause 6 which regulates the objects of the Central Bank;
- Clause 7 which entrusts the Central Bank with powers to determine monetary and exchange policy, management of official international reserves and issue and manage the currency of Sri Lanka with independence to corporate with public international organizations without the sanction of the Parliament (which includes Asian
Development Bank and International Monetary Fund; Clause 123);
- Clauses 11 read with 12 and 13 which creates the Monetary Policy
Board with powers to formulate monetary policy and implementation of exchange rate regime at its sole discretion;
- Clause 17(3) which vests with the discretion to the Governing Board to release Deputy Governors to serve in an office or position of public international financial institutions or non-financial institutions;
- Clause 24(2) which provides for the releasing of officers of the Central
Bank to serve in public international financial institutions and other entities;
- Clause 26 (including 26(5)) which requires the Central Bank to sign a monetary policy framework agreement with the Minister with regard to setting out the inflation target to be achieved by the Central Bank;
- Clause 29(3)(b) which authorizes the Central Bank to open and maintain cash, precious metals and securities accounts on the books of foreign banks and international organizations including public international financial institutions (without the sanction of the Minister or the Parliament);
- Clause 39 which provides for Loans to and from foreign institutions and to act as an agent or correspondent of foreign entities at its discretion;
- Clause 43 which entrusted with the Central Bank to decide and abolish the use of “cent” in transactions and Clause 47 (read with Clause 123) which vests with powers to authorize to use of currencies other than Sri Lankan Rupees in executing transactions between residents in Sri Lanka;
- Clause 61 which provides for Supervisory authority of the Central Bank;
- Clause 80 which assures the unaccountability of the Central Bank to the Parliament;
- Clause 81 read with Clause 84(3), which positions the Central Bank (which can invite advice from foreign elements) as the financial advisor to the Government;
- Clause 85 which empowers wide discretionary powers to act in cooperation with foreign regulatory, supervisory or monetary authorities or public international financial institutions ;
- Clause 86 which imposes prohibitions on monetary financing;
- Clauses 98 and 99 which directly and impliedly grant legal section to Annual financial statements, depriving the Parliament of powers to decide with regard to the policies and principles embodies therein;
- Clause 104 (read with clause 6) which limits the accountability of the
Central Bank to the Parliament with discretion to decide in offering its support the economic policy of the Government;
The full petition is annexed herewith for the benefit of the readers.
