Samurai bond gets cabinet nod – CBSL Governor

Cabinet approval had given to appoint a Steering Committee and Technical Evaluation Committee for the mobilization of the issuance of a samurai bond, Central Bank Governor Dr. Indrajit Coomaraswamy said. “The cabinet approved the Steering Committee and the Technical Evaluation Committee for the mobilization or the issuance of a samurai bond. So we are going to work on that over the next couple of months. As you know we have issued about 14 dollar denominated sovereign bonds and this is going to be our first samurai bond and we are in the process of diversifying investor base in raising the money that Sri Lanka needs,” Dr. Coomaraswamy said whilst addressing the Asian Banker ‘Finance Sri Lanka 2019’ conference in Colombo last week (5). Speaking further Dr. Coomaraswamy pointed out the importance of the new Monetary Law Act. ‘We need a new act and we are in the process of doing that and the flexible inflation targeting regime will be embedded or the proposal is to be embedded in the new monetary law act.” “One of the biggest criticisms about Sri Lanka is that the lack of consistency and predictability in policy making. By putting the flexible inflation targeting regime in to the monetary law then it will be signaling very clearly that this is going to be the framework for monetary policymaking and it will bring about greater consistency and predictability as far as monetary policy is concern.so that is why actually we are putting this to the law,” Coomaraswamy said. Another key change is the separation of the treasury and the central bank in the governance of the Central Bank, Dr. Coomaraswamy noted. “Historically the Secretary to the Treasury was a member of the Monetary Board. In practice we have had fiscal dominance. The Central Bank has financed the Government, time and again, through buying Treasury bills, and through printing money, which is the worst thing that any Central Bank can do. It creates inflation, that money leads to imports and it can lead to acid bubbles. Clearly the Central Bank participating in the primary auctions for Treasury instruments is the most destabilising thing a Central Bank has done and we have done that time and again. We want that prevented by law. The Central Bank by law should not be allowed to print money for the Government,” he said. Dr. Coomaraswamy also called for the support of the Government and Parliament to pass the Act within the next two months. “It is not that the Government is being abandoned by the Central Bank. We have created a new architecture for the Central Bank to be released from this terrible, terrible practice of printing money and by law it should be prevented. This is something I have great conviction. I hope the Government and Parliament also bear that view. We need to get this through Parliament in the next couple of months. ”

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