For securing these objectives, the Central Bank has been granted the authority for administration, supervision and regulation of the monetary, financial and payment system of Sri Lanka through actions authorized by the MLA. Therefore, we must clearly understand the scope of our mandate. The Central Bank cannot directly undertake business to provide employment or create income or construct buildings to promote financial or business centers. The Central Bank’s scope of mandate for the stability of Sri Lanka economy is essentially the regulation and supervision of monetary, financial and payment system of Sri Lanka. Accordingly, the functions or activities the Central Bank carries out in its normal operations are the issue of the currency or legal tender, implementation of monetary policy, supervision of banks and financial institutions, management of an international reserve, operation of payment systems and financial related services to the Government as the Government agent. How the Central Bank carries out these functions with the help of nearly 1,500 staff is a complex and technical subject. The judiciary and legal community present today here may recall a number of court cases being heard now and judgments delivered in the past connected with certain operations of the Central Bank, because either Central Bank procedures are not prudent for safeguarding the public trust or the public ignored the scope of the mandate of the Central Bank to get involved in financial sector developments.
The Central Bank as the banker to the Government maintains accounts of the General Treasury and Government institutions and agencies. The Treasury Account, known as DST Account, is the main transaction account to handle public debt flows. In terms of the MLA, Government or Government institutions and agencies must obtain the advice of the Monetary Board on the implications if any borrowing on the monetary conditions before raising such debts. This is to ensure that Government borrowing is made with the concurrence of the Monetary Board in line with the monetary policy. Two other important agency functions are the management of Employees’ Provident Fund and administration of Exchange Control Act, both of which have evolved controversy. In the case of Employees’ Provident Fund, the Monetary Board is empowered to manage the fund including investment of surplus funds in securities the Monetary Board considers fit. I know you have heard enough on some of the EPF investments made in the recent past. Given the nature of the EPF and responsibilities of the Government, EPF funds are, I would submit meant only for safer investments. BIS central bankers’ speeches  5  The Exchange Control Act is to regulate and manage foreign exchange flows of the country which is essentially a part of macroeconomic management. In economics, exchange controls are about the regulation of the quantity or volume in the foreign exchange market. Conversely, the Central Bank regulates the price or exchange rate in the market under the MLA.