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Sunday, 03 July 2016





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SLFP’s internal rift as National Unity Govt unites over CB Governor

The Sri Lanka Freedom Party (SLFP) bigwigs have already made it clear that they will back the Executive Presidency - the system they kept demonising for 17 years when the party was in opposition.

Its former leader Chandrika Bandaranaike ran for presidency in 1994, with the promise of abolishing Executive Presidency but she failed to deliver on the pledge. Her successor, Mahinda Rajapaksa, also renewed the promise when he became the SLFP’s presidential candidate in 2005.

Although Rajapaksa remained in power for 10 years - with a two third majority in Parliament - he conveniently forgot his electoral pledge. Instead, he further strengthened the Executive Presidency by passing the controversial 18th Amendment in the House, which lifted the term limit of the Executive President.

President Maithripala Sirisena, when he became the Common Candidate of the opposition in November, 2014, pledged to fully abolish the Executive Presidency. In fact, his pledge was the main rallying point for civil society groups who campaigned for him at the last Presidential election. The President renewed the same promise when he addressed the funeral of Maduluwawe Sobhitha Thera, a prominent civil society leader who strongly supported him at the crucial election in January.

When the Sri Lanka Freedom Party decided to appoint President Sirisena as the party leader, it agreed to embrace the ‘yahapalanaya’ policies, including the total abolition of Executive Presidency. Unfortunately, over the past 16 months, the party constantly failed to stick to its initial agreement with the President.

When the 19th Amendment was presented to the House, the SLFP pushed for its dilution. As the UNP did not have the numbers to ensure its smooth passage, the party had to rely on the SLFP’s support and, as a result, a diluted version of the 19th Amendment was passed in Parliament.

President Sirisena made a surprise visit to the Central Bank premises. He was later joined by Prime Minister Wickremesinghe and Governor Mahendran.

Now, the SLFP’s is preparing throw another spanner in the works. The party is now attempting to oppose the total abolition of the Executive Presidency, saying it would ‘weaken’ the country’s system of governance.

When the matter was taken up at the party’s Central Committee meeting last week, President Maithripala Sirisena said he strongly supported the total abolition of the Executive Presidency. He informed the party seniors that he would not support retention of Executive Presidency as he campaigned against it at the last Presidential election.

As a result of this, there are two schools of thought in the SLFP over the total abolition of Executive Presidency. The party is expected to engage with the mechanism that has been set up to formulate the new constitution. It is still a question as to how the party is going to deal with the process.

New party

While ironing out differences concerning the abolition of Executive Presidency, the SLFP also has to deal with much bigger problems. The party’s rank and file was perturbed with the rumour that former Economic Development Minister Basil Rajapaksa was preparing to form a new party. It was revealed that Rajapaksa had held a round of meetings with the party’s Local Government representatives over forming a new party at the LG polls tentatively scheduled for next year.

Many SLFPers, including some staunch supporters of former President Rajapaksa, viewed Basil Rajapaksa’s initiative with a modicum of suspicion. They were of the view that there was no urgent need to form a party, as the government is yet to announce the Local Government election.

As a result of this development, some SLFP seniors supporting the former President expressed concerns over Basil Rajapaksa’s initiative. Among them were Mahindananda Aluthgamage and Kumara Welgama who still function as Central Committee members of the party. However, these conflicting views have created a lot of confusion among grassroots members of the so-called ‘Joint Opposition’ group.

In this context, the JO group is currently organising an anti-government protest march from Kandy to Colombo. Many observers believe that the protest march will be the ‘unofficial’ launch of the political movement, led by the former President.

However, when asked about this, the former President told reporters that he did not know anything about a “new political party.”

“This is a new political movement; not a party,” Rajapaksa said, in an attempt to evade questions from a group of journalists who surrounded him during a recent event.

It is evident that the so-called movement will lay the foundation for the Rajapaksas to form a new political party when the election is announced. However, it is important to note that even the pro-Rajapaksa group is divided over the formation of a new political party. It can be assumed that some of them might choose to remain with the SLFP, if and when Rajapaksa decides to form a new political party to contest the forthcoming Local Government election.

CB Governor issue

The controversy surrounding the post of Central Bank Governor turned out to be a political tornado this week causing ripples in the ruling alliance.

It all began when the Committee on Public Enterprises (COPE), chaired by JVP MP Sunil Handunnetti, met for a special session on June 29 to discuss about the inquiry into outgoing Central Bank Governor Arjuna Mahendran. The highlight of the meeting was the report submitted by the Auditor General on the Bond controversy, which ultimately resulted in Mahendran’s exit.

As expected, the Auditor General’s report did not ‘help’ Mahendran’s position. While stating that it did not inquiry into the ‘criminal aspect’ of the matter, the 196 page report said the Central Bank Governor had failed to work with “professional due care.”

The Auditor General, in his report, also said that an estimated loss of Rs 889,358,050 and Rs 784,898,755 could have been avoided during the bond issues on February 27, 2015 and March 29, 2016, respectively. However, he did not hold the Central Bank Governor personally accountable for the situation.

Before presenting the ‘brief version’ of the report to the committee, the Auditor General submitted the full inquiry report to Speaker Karu Jayasuriya. According to informed sources, the full report had 1,252 pages and contained sensitive information concerning the bond controversy.

The COPE committee decided to summon another meeting on July 5 to discuss the content of the Auditor General’s report. On July 7, the committee is expected to summon several senior officials of the Central Bank, including the outgoing Governor, Arjuna Mahendran. A member of the committee told the Sunday Observer that they would seek access to the Auditor General’s full report on the bond issue, before preparing its final report on the matter.

A day after the COPE committee received the Auditor General’s report, President Sirisena, addressing a kidney disease prevention program at the Mahaweli ground, Girandurukotte, said a new Central Bank Governor would be appointed in the next few days.

At the time the President made this statement, the rumour mill in Colombo was agog with stories about the “next Central Bank boss”. Some believed that Deputy Minister Eran Wickremaratne, who had a successful career in the banking sector before taking to politics, would be approached for the post. However, the Deputy Minister categorically said he did not intend to become the Central Bank Governor as he had to protect the interests of those who voted for him. It was quite clear that the Deputy Minister did not want to take up the position at the expense of his short but successful political career.

Two deputy governors already serving in the bank were also in the fray. They were Dr. Nandalal Weerasinghe and P. Samarasiri. Nandalal Weerasinghe, who received his Phd in Economics from the Australian National University, has served as a Deputy Governor at the Central Bank for over three years. Before assuming duties as a Deputy Governor, he was attached to the international Monetary Fund (IMF) as an Alternate Executive Director.

Samarasiri has been a Deputy Governor at the Central Bank since June 1, 2014 and served as its an Assistant Governor since December 3, 2007. He has also served as the Secretary to the Monetary Board.Before being promoted as an Assistant Governor in December 2007, he was the Director of the Bank Supervision Department.

Samarasiri joined the Central Bank as a Staff Officer in January 1983 after graduating from the University of Colombo with a BA Degree (Hons) in Economics. In 1991, he obtained an MA in Economics from the University of Kansas, USA, under the scholarship scheme offered by the Central Bank. Accordingly, he now counts 31 years of experience in Central Banking, particularly in the areas of statistics, economic policies, regulation and supervision of banks and non-bank financial institutions, financial system stability, corporate governance, currency management, foreign exchange policies, financial intelligence and regional development.

Meanwhile, former Treasury Secretary Charitha Ratwatte, was also a key contender for the Central Bank Governor’s post. Ratwatte is a lawyer with over 38 years experience, who has worked with government and business at the CEO level for over 20 years. After the new government came to power in January, last year, Ratwatte functioned as an Advisor to the Prime Minister. He was instrumental in introducing Key Performance Indicators (KPIs) to the public sector, under the new government.


It was widely believed among political circles that the new Central Bank Governor’s appointment would be an interim one. Arjuna Mahendran said he would stay away from the post until the conclusion of the ongoing investigations and did not seek an extension. Prime Minister Ranil Wickremesinghe too, addressing a function in Colombo, said charges against Mahendran have not been proven. The Prime Minister also indicated that there was no logical reason to deprive Mahendran of the position, based on unsubstantiated charges. Therefore, Mahendran too was not completely out of the picture. No one was in a position to rule out the possibility of his reentry.

It was clear, however, that the Prime Minister’s camp preferred Ratwatte to be the Central Bank Governor in the interim. The President’s side, on the other hand, was keener on having Dr. Nandalal Weerasinghe as the Central Bank head. As a result of this deadlock, some suggested Samarasiri as a potential “compromise solution” for both parties.

A few hours after making a statement on the appointment of the new Central Bank Governor, President Sirisena made a surprise visit to the Central Bank promises. Some assumed the objective of the President’s visit to Central Bank was to announce the name of the new Governor. He was later joined by Prime Minister Wickremesinghe and Governor Mahendran.

Many rumours emanated from the corridors of the Central Bank while the President, the Prime Minister and senior Central Bank officials were involved in a special discussion. Interestingly, none of the journalists were allowed to approach the President and the Prime Minister within the Central Bank premises. The Economy Next website said it was possibly the tightest since the Tamil Tigers bombed the Bank in January 1996.

However, after the discussion, the Prime Minister made a brief remark to a journalist, saying, “we only discussed about the economy.”

It was rumoured that the President was going to announce the appointment at the Central Bank, but later changed his mind, after discussing the matter with the Prime Minister. However, there was no official statement from the government to clear the air over the issue.


On Friday, however, some media station ran a story, saying the President would make a decision on the Central Bank Governor after Finance Minister Ravi Karunanayake’s return to the country. The Finance Minister was on an official visit to China and was expected to return to the country on Sunday. Those who ran the story attributed it to the Government Information Department.

A few hours later, however, the Media Ministry issued a statement, saying the Government Information Department did not release any statement with regard to the matter. The statement was signed by Nimal Bopage, Secretary to the Media Ministry. This further contributed to the confusion surrounding the appointment of the new Central Bank Governor.

Meanwhile, key civil society organisations and professional bodies too were getting agitated over the delay. The Bar Association of Sri Lanka (BASL), on Friday, requested President Sirisena to expeditiously appoint a new Governor to the Central Bank, to settle ‘uncertainty’ which might have an impact on the governance of the nation.

BASL President Geoffrey Alagaratnam PC, in a letter to the President, requested to appoint the most qualified individual to this high office to refrain from making any appointment which will lead to allegations of political bias. Other civil society organisations too, speaking to media on the matter, expressed similar sentiments.

On Friday night, it looked as if the key stakeholders of the unity government might have to agree on a ‘compromise candidate’ when it came to the Central Bank Governor’s appointment. Due to the impasse between the two main camps in the government, both Ratwatte and Weerasinghe did not seem to be viable options.

‘Alternate options’ included Prof Lalith Samarakoon and Indrajit Coomaraswamy. Samarakoon is a Professor of Finance at the University of St. Thomas in St. Paul, Minnesota. He is also a Fellow, Chartered Accountant and a CFA Charterholder. It was rumoured in the financial circles that Samarakoon, a well-known economic specialist, had been approached for the Central Bank’s top post.

However, all key stakeholders involved in the issue later settled for Dr. Coomaraswamy who was equally strong on both academic and administrative fronts.

‘After consulting all parties concerned, I appointed top economist Dr. Indrajith Coomaraswamy to lead the Central Bank of Sri Lanka,’ President Sirisena said in a Twitter message, on Saturday morning.

Indrajit Coomaraswamy, hailing from one of the country’s most respected Tamil families and the son of the iconic diplomat, Raju Coomaraswamy aka‘ Roving Raju’, is one of Sri Lanka’s highly respected economic circles. He was also a dashing sportsman having captained the Sri Lanka and CR & FC rugby teams. In addition, he captained the Harrow School and Emmanuel College, Cambridge cricket XIs. He also played cricket for the Tamil Union Sports Club in Colombo.

Dr. Coomaraswamy received his primary and secondary education at Royal College in Colombo and at Harrow School in England.He obtained his undergraduate degree at Cambridge and his Doctorate at the University of Sussex.

Joining the Central Bank of Sri Lanka in 1973, he served in the Economic Research, Statistics and Bank Supervision divisions as a staff officer till 1989.He was attached to the Ministry of Finance and Planning from 1981 to 1989.

The President’s move to appoint Coomaraswamy was nothing short of a ‘masterstroke’ as he was an acceptable candidate to all stakeholders involved in the issue. He had previously worked with Prime Minister Wickremesinghe and had earned a reputation as an official with an unblemished track record. His appointment ended the biggest political standoff the unity government faced during the past 16 months.

Government sources said Dr. Coomaraswamy would assume duties as the new Central Bank Governor on Monday morning. However, it can be assumed that the new appointment would be the biggest challenge in the 66-year-old senior economist’s illustrious career.

While supporting the ongoing probes into the Treasury bonds issue and other allegations, Coomaraswamy will have to take drastic measures to rescue the country from the current economic mire.


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