Removal of state bank directors defined by Acts of Parliament -Eran | Sunday Observer

Removal of state bank directors defined by Acts of Parliament -Eran

Conceding that the President was entitled to request the Government to reconstitute the Boards of state banks, State Minister for Finance, Eran Wickremaratne explained that changing of Bank Boards is legally defined in an Act of Parliament, after inspired leaks across the media last week claimed the Boards of the Peoples’ Bank and the Bank of Ceylon were ‘dissolved with effect from midnight’ last Wednesday (17).

In an interview with the Sunday Observer, the State Minister said generally it takes place in consultation with the subject minister and the legal process would be followed by all sections of the Government.

Excerpts of the interview:

SO: It was reported that the President had dissolved the Director Boards of the People’s Bank and the Bank of Ceylon, but the directors say they have not been informed. Could you enlighten us ?

EW: I also read it in the media. I don’t know whether that was a request by the President to reconstitute the Boards of the banks. So we have no news because that request has gone. I think Board members should individually respond because these Boards are constituted under different Acts and laws. So we have to follow that procedure.

SO: The UNP says only the Ministers concerned are empowered to dissolve the respective Boards but not the President himself. What is correct?

EW: I think it all depends on the specific Acts governing those banks. So the President is entitled to make a request to the Government but how it will legally operate is defined in that particular Act. Generally it will be done in consultation with whoever the Minister the subject has been assigned to.

SO: Is this because the 19 A has curtailed presidential powers?

EW: No. Even before the 19 A, the assignment of directors to the banks was the same and based on Acts of Parliament. It was just done often during the previous regime without any regard for the law. They used pressure in circumventing the law and getting whatever they want done. Otherwise, in terms of legality there is no difference.

SO: To resolve the deadlock, sections of the UNP want to make an early political decision after the Prime Minister’s return from India. Will this move thaw or complicate the future of the Unity Government?

EW: No, I don’t think this is an irresolvable issue. If there are differences of opinion, they will be resolved through discussions. But the legal process will be followed by everybody including the President and the Prime Minister, because that is the hallmark of this Government rather than that of the previous Government.

SO: It is reported that the Prime Minister during his Indian visit will discuss the alleged RAW presidential assassination bid with the Indian security establishment. What is the impact of this on Indo-Lanka relations and our foreign policy as well?

EW: These allegations have come from unsubstantiated sources and the investigations are going on. I think till the investigations are completed, you can’t even establish whether this was a serious threat or not. I don’t think that the relationship with India will suffer given that President Maithripala Sirisena and Indian Prime Minister Narendra Modi have also been in contact with each other and Prime Minister Ranil Wickremesinghe is on a state visit to India since this story surfaced. So I don’t think that there will be any diplomatic implications.

SO: The Government says the impact of rupee devaluation could be mitigated if exports are encouraged and imports curtailed. Your observations?

EW: Yes. A currency is strong if reserves are also strong. If reserves are strong, the export income must be much higher than import expenditure and the current accounts need be healthy. But at present the currencies around the world have really suffered because of the strengthening of the US Dollar. That is what has really happened. Countries have resorted to temporary means of curtailing unessential or luxury imports. These are immediate measures because the outflow of Dollars could be reduced. I must emphasise that these are only temporary measures that have been put in place by the Central Bank increasing the margins that have to be kept on opening import letters of credit. If you look at the depreciation itself, the Sri Lankan Rupee has depreciated as at October 16 by about 11 percent, Indian Rupee nearly 15 percent, Pakistan Rupee 20 percent, Chinese Renminbi 6 percent and Indonesian Rupiah 12 percent. If you look at it with the exception of the Thai Baht and Singaporean Dollar in Asia, currencies of other countries have been depreciated far more than that of Sri Lanka. So this is a global phenomenon and the US Dollar has been strengthened quite a bit. The fundamentals of our economy are stronger, our relative depreciation is less than those countries.

SO: The Joint Opposition (JO) says the rupee devaluation and resulting economic crisis cannot be attributed to American-Chinese trade war and American economic policies. Is there any truth in this?

EW: I think that the evidence particularly on currency is from statistics that have already been quoted and that is not a local issue. The Sri Lankan economy is integrated with the international economy and exogenous factors affect it. One factor is the trade war between the two countries. The US policy and liberalisation of US interest rates attracting basically Dollars away from emerging markets into the US are factors as well. But also if you say there are other domestic factors , for example one domestic factor is that the previous regime comprised mainly the members of the JO and the previous Finance Minister, the defeated President Mahinda Rajapaksa basically propped up GDP growth by borrowing heavily in foreign currency at very high interest rates. The payments on those debts are due now in 2018, 2019, 2020 and 2021. They have bunched up and it is a period of peak payments that have come. It was an irresponsible economic policy that they followed since they borrowed and invested money in infrastructure which is a non-tradable sector. There are no financial returns from that sector. So you are investing without a cash flow coming back to repay the debt. If you borrowed and invested within the tradable sector then that is a different story. We have invested heavily in the non-tradable. We have created through bad policy a really poor situation. What do we do as a new Government? Our top priority becomes meeting international obligations to pay our debt. In order to do that we have to accumulate reserves.

In the period the SLFP President was in power, Sri Lanka’s exports have gone down from 30 percent to less than 14 percent in the same period as the percentage of the GDP. When you borrow foreign currency, you have to pay back in foreign currency which means you have to encourage exports to generate the foreign currency. It is we who have really reversed that situation in the last couple of years. We have put in a lot of discipline into the economy so that we will build reserves and meet international obligations. With discipline like that the Budget deficit comes down. Our Budget deficit has come down from 7.7 percent to 5 percent this year. Exports have increased to a historical height. The export earnings in 2017 and onwards are the highest ever for a decade and the growth was 10.2 percent. We had the highest reserves in April this year. We had US$ 1.9 billion Foreign Direct Investments (FDIs) last year. When we look at inflation figures, it is very low. The lowest ever of 1.5 percent was reported in April this year. Even in August, the inflation is low and is coming down further. When we look at the prices of some essential food commodities like dhal, onions and canned fish, prices are at a low. The Government’s policies have led to low inflation. The prices of petrol and diesel are still lower than it was when we took the reins of Government in 2015. That is not to say that the people don’t have economic issues in other areas.

SO: Can the people expect anything favourable from the Budget amidst what is being called an ‘economic crisis’?

EW: Yes. I won’t call it an economic crisis. We have managed the economy tightly and we are meeting all our obligations. The fundamentals of the economy are very sound and strong. What has also turned favourably is after having a drought in 2017, we had good weather this year and this will augur well for a good harvest. Therefore, GDP and agricultural production are up. So there will be a better period ahead. We have done a few more things to strengthen the rural economy. We are investing heavily on the “Gamperaliya” program. On Friday (October 19), we opened our fifth grain storage facility at Embilipitiya under “Gamperaliya.” This will be managed by the Regional Development Bank (RDB). This is more a market oriented thing. We will expand this facility with freezer storage and transport of vegetables and fruits as we move forward. Information Technology has continued to grow this year. We have already got about US$ 1.2 billion exports in information technology. We have also a very strong growth in tourism. Tourist arrivals in 2014 were 1.5 million, 2.1 million in 2017 and in 2018 we hope to get about 2.4 million. In terms of earnings in 2014, we had US$ 2.4 billion and US$ 3.9 billion in 2017. The Hambantota Port has also got started. In the last seven months, we had less than 200 employees there and now we have 700. The Colombo Port is also performing very strongly in terms of transshipment and growth.