Central Banks Public Debt Department will be shifted to the Ministry of Finance by introducing amendments to the country’s monetary act next year.
The Ministry of Finance should have a proper system to mange public debt before shifting the public debt department away from the CB, economic analysts said.
Sri Lanka having a single regulatory body for the financial industry with a long lasting culture struggling with political corruption will find it difficult to maintain independent debt department at the Finance Ministry with high political influence, they said.
The legal and accountability framework proposed in the amended act provides greater independence and accountability to the Central Bank.
At present the Central Bank has been required to buy Treasury bills in the primary market at times without considering monetary conditions.
The bank is also entrusted to provide credit to the government through provisional advances of 10 percent of the estimated state revenue each year.
In future Central Bank will not purchase treasury bills to raise money for the government.
But it will purchase T-bills for its own open market operations, and maintain Treasury bills in its stocks to meet the market conditions and liquidity situations.
Amendments to the Monetary Law Act (MLA) will be presented to the parliament the parliament in March, 2019 in an effort to suit flexible inflation targeting (FIT) framework.
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