The Central Bank -- known in banking circles as 'The Bankers’ Bank' or the 'Bank of Final Resort' -- issued its annual report for 2011 as required by the Monetary Law.
The Governor was to exhort others, especially those in the private sector to follow the Bank's example by preparing and making public their annual reports so early. What he didn't say, or couldn't say, was what happened to the numerous annual reports and audit reports of the Government's own Auditor General and the recommendations he has made as well as the reports of the Parliamentary Oversight Committee, the Committee on Public Enterprises (COPE) whose reports end up gathering dust with little or no follow-up action or remedial measures taken. These relate to billions of rupees, squandered through corruption, waste and mismanagement.
It's undoubtedly a good thing if annual reports of public institutions can be made ready and available in the public domain within three months of the end of the financial year, but it is of utterly no use if they cannot be put to practical use thereafter. These reports end up of mere academic interest. The media regularly point out to this deficiency of inaction on the part of the Government, but to no avail.
There was a time, especially during the 1970-77 period, when annual reports of state corporations were tabled in Parliament so dated that not only had the Minister changed, but the Board of Directors were no longer in the land of the living to answer questions. One prominent legislator of the day was to say that discussing such reports was "a waste of time, waste of paper and a waste of tongue".
The Central Bank for years has been an autonomous institution created to oversee the financial management of the country and provide independent advice. So much so, that it was once known by the Government as "Public Enemy Number 1" in a typical 'shoot the messenger' approach for providing negative reports on the Government's handling of the economy. Other times, when it would provide a rosy picture of the economy, critics were quick to pounce and quote; "There are three types of lies -- lies, damn lies and statistics".
Today, like almost all other public institutions that are meant to be independent of the Government, the Central Bank is so terribly politicised that its reports need to be taken with a pinch of salt. Opposition legislators have questioned the statistical jilmarts adopted in working out inflation figures (see page 14). Whether the Central Bank still deserves the "Public Enemy Number 1' tag nowadays for misleading the public because of its capitulation to Government is a moot question.
Take for instance, the case of the Governor leading a 'suicide mission' for Sri Lanka to host the Commonwealth Games of 2018. This is not reflected anywhere in the report. The official excuse for this omission is that it was the private sector that "mainly funded" the adventure. Similarly, the reference to the sudden announcement of the devaluation of the rupee in the 2011 November budget which took the Governor and the Bank by total surprise finds only a passing reference. That too in defence of the Bank's policy.
The country has just about concluded celebrating a rather subdued National New Year. Only a few weeks ago, alarming gaps in the country's Balance of Payment, i.e. monies spent on imports in foreign exchange as against monies received from abroad in foreign exchange, forced the Government to raise prices and taxes and curtail credit given by banks. The cost of living took a sharp upward trend as a result and the people have accepted it with muttering resignation.
With its reserves spent last year in a bid to artificially prop up the Sri Lankan rupee, the Government took some sweeping measures almost overnight, and people received a reality check with a jolt. Why these measures had to be taken without forewarning after the sunshine stories were created by the Government itself, is what the people ask. The stark reality that you cannot adopt an incoherent fiscal policy and simultaneously hoodwink the masses with the state of the economy is something that ought to have dawned on the decision-makers by now.
The President, when accepting the Central Bank report this week spoke of last year's economic growth of an impressive 8.3% and said that, unlike in the past, 55% of that growth was concentrated in the rural areas.
That 8.3% growth is estimated to drop this year as economic retardation sets in with the just introduced fiscal reforms - with threats of more to come as our front page story this week states. But the President's assertion that there is economic growth in the provinces is plain to see. The countrywide road network is being upgraded, for instance, but some of the mega-projects have come in for severe scrutiny. They have been implemented so fast, with contracts awarded with no transparency, that conservative economists tend to shudder at the consequences.
Take the classic case of the national carrier -- over Rs. 15 billion in the red. It is right now discussing winding down its European routes, and yet has obtained a multi-million dollar loan for new aircraft through a lesser known Middle Eastern bank with the full backing of the state-owned Bank of Ceylon. Already, middle men are at work to broker deals. Someone, however, someday, will have to repay these loans.
The Central Bank report is somewhat cautious in its projections for the coming year, not wanting to be seen as having misread the gloomy forecasts, globally and locally. "Sri Lanka's sustained growth momentum has taken the country to the high growth trajectory placing the country among the middle income economies of the world. Against this background, challenges, which can have a downside risk on potential growth become focal to economic policy management," the report notes.
One could say that 'even the Central Bank', has abandoned its optimistic approach for this year. It came in for some stick in 2011 for misleading the people who now have to pay a heavy price through raised prices, taxes and a credit crunch. The corresponding austerity measures to be adopted by the Government itself are, alas, nowhere to be seen so far.
One can therefore, take the Central Bank as a seer of the economic outlook for this country only with some trepidation due to its 2011 pronouncements. The wiser approach to take might well be to hope for the best and prepare for the worst for the months ahead.