He is to be responsible for the execution and administration of policies and measures adopted by the Monetary Board, for the direction, supervision and control of the operations of the Central Bank, and for its internal management and administration. He is to be chief representative of the Bank in its relations with outside persons, ….. Accordingly, the Governor should be a man of recognized and outstanding competence in, and understanding of, the economic and financial problems of Ceylon, and of unquestioned integrity and responsibility...” Exter then states, and I quote further: “It is important that the Governor should have had actual financial experience. In many countries this point has actually been incorporated in legislation, as the following quotation from De Kock’s book on Central Banking shows: ‘… in the case of some central banks it has been laid down by statute that the Governor and Deputy-Governor shall be ‘men of proven financial experience’, as in Canada, or ‘persons possessed of actual banking experience’, as in New Zealand, or ‘persons of recognized banking and financial experience’, as in Argentina, or that the Governor shall be a ‘person of tested banking experience’, as in the Union of South Africa and Mexico.’” Mr. Chairman, you may remember when I was first appointed Governor, there were some who claimed that a person with “financial experience”, was not a suitable choice, to undertake the duties of the Governor.
So, a balance was struck and the decision to increase the petroleum prices was postponed until February 2012, because we knew that, by that time, the inflation figures would be very low, at less than 3%, and that benign situation would then give us a comfortable cushion to make the price adjustment, without harming the inflation numbers or the inflation outlook. This was then, just one, but a representative case study of holding on to a difficult position in the short term, to realize a long term position, so as to benefit by an even more significant outcome. It was, as Exter may have been happy to acknowledge had he been present, a pragmatic decision of the Government working closely with the Central Bank, cooperating on a complex and delicate issue, to deliver stability and growth in the long term. A “shared vision” and “goal congruence” Mr. Chairman, I am often asked by people as to the exact definition of the economic philosophy behind our country’s economic policies. As is usual in any field of learning, academics and scholars like to categorize a series of policies, according to a general character, or to place them in a framework of a pre-determined school of thought. Where then would our current economic policy framework, fit in? Is there a particular model that Sri Lanka follows? To respond to such questions, let us try to understand what exactly our economic planners are doing, and what they are attempting to achieve.