{"id":79394,"date":"2022-09-06T01:11:10","date_gmt":"2022-09-06T05:11:10","guid":{"rendered":"http:\/\/dbsjeyaraj.com\/dbsj\/?p=79394"},"modified":"2022-09-06T19:19:38","modified_gmt":"2022-09-06T23:19:38","slug":"central-bank-governor-states-that-there-is-no-practice-of-revealing-imf-programs-to-parliament-early-memorandum-of-economic-policies-signed-between-imf-and-finance-minister-has-nev","status":"publish","type":"post","link":"https:\/\/dbsjeyaraj.com\/dbsj\/?p=79394","title":{"rendered":"Central Bank Governor States that there is no Practice of Revealing IMF programs to Parliament early; \u201cMemorandum of Economic Policies signed between IMF and Finance Minister \u201chas never been tabled in the parliament to my knowledge and has not even been submitted to the cabinet\u201d says Dr.Nandalal Weerasinghe"},"content":{"rendered":"


\nSri Lanka had no practice of revealing International Monetary Fund programs to parliament early and tax changes can only be revealed to the parliament at the time of implementation, Central Bank Governor Nandalal Weerasinghe said.<\/strong><\/p>\n

Sri Lanka has had 16 IMF programs in the past after balance of payments trouble was triggered by Sri Lanka\u2019s intermediate regime central bank which prints money to suppress market interest rates leading to forex shortages.<\/p>\n

Sri Lanka\u2019s finance minister usually signs a memorandum of economic policies with the IMF as part of a program, Governor Weerasinghe said.<\/p>\n

<\/p>\n

\u201cAt that stage it has never been tabled in the parliament to my knowledge and has not even been submitted to the cabinet,\u201d he said in a talk show hosted by Sri Lanka\u2019s Newsfirst television.
\nWhile it was good for purposes of transparency to do that, there was market sensitive information in the program, he said.
\nTaxes are also not announced usually until they are implemented, he said.<\/p>\n

\u201cA lot of tax reforms cannot be informed to the parliament or announced in advance until that is basically implemented. Things like income taxes,\u201d he said.<\/p>\n

The IMF had mentioned wealth tax and higher income tax rates and base broadening and improving administration was part of the policies.<\/p>\n

\u201cBasically there is a limit to what can be shared with the public or parliament. It should be shared with the parliament because it is the authority on public finance,\u201d Governor Weerasinghe said explaining past practices.<\/p>\n

\u201cAt the time of implementation it will be submitted to the parliament, and then implemented.\u201d<\/p>\n

Harsha de Silva, who chairs the Committee on Public Finance of Sri Lanka\u2019s parliament, has called for the IMF staff level agreement to be tabled.<\/p>\n

On a previous occasion current President Ranil Wickremesinghe promised opposition legislator M A Sumanthiran to also keep the parliament informed when the deal was struck.<\/p>\n

It is not clear whether the staff level agreement will be shared with external creditors.<\/p>\n

Sri Lanka\u2019s recent IMF programs where the policies and targets contained in letters of intent signed by the Finance Minister and Central Bank Governor have been published by the Fund after they were approved by its Executive Board.<\/p>\n

There have been accusations by activists that IMF programs are fundamentally illiberal and also undemocratic.<\/p>\n

The IMF was set up mostly by New Dealers of the US, who were responsible for the most draconian economic interventions known in that country\u2019s history during the 1930s which were also blamed on prolonging the Great Depression by triggering what is now called \u2018Regime Uncertainty\u2019.<\/p>\n

US interventionists also devalued the dollar and barred the public from holding gold in the 1930s much like central banks in countries with monetary instability now print money to create forex shortage and cause police to arrest hapless members of the public who hold foreign currency to protect their meagre savings from the central bank.<\/p>\n

However the Fund became more transparent from the mid-1990s and started to publish agreements and its economic analysis contained in Article IV staff reports with any market sensitive information redacted.<\/p>\n

Sri Lanka\u2019s central bank has sometimes blocked them.
\nThere are also charges that state-owned central banks which impose a money monopoly on the people and where un-elected officials make decisions using illiberal and opaque processes to suppress market rates through \u2018central bank independence\u2019 are also undemocratic and unaccountable.<\/p>\n

Sri Lanka is now set to create a law giving \u2018independence\u2019 to the central to operate discretionary \u2018flexible\u2019 inflation targeting and a \u2018flexible\u2019 exchange rate, which critics say is fundamentally flawed and was responsible to recent quick fire currency crises.<\/p>\n

Meanwhile IMF official has said its plans has required that a 2023 budget to be made in line with the program be passed in parliament as a prior action to get public consent and legitimacy.<\/p>\n

Sri Lanka started an unusually undemocratic practice of slamming taxes through midnight gazette and imposing new taxes after the budget especially in the 1970s going against the fundamental democratic practice of \u2018taxation of consent\u2019 which led to the birth of parliament in Britain.<\/p>\n

Before parliaments were set up, taxes were imposed by \u2018Royal Prerogative\u2019 suddenly as in IMF programs and budgets in Sri Lanka.
\nHowever critics say through various practices including the midnight gazette, a \u2018Minister\u2019s Prerogative\u2019 has returned.<\/p>\n

Sri Lanka\u2019s 2019 tax cuts were a classic case of violating the principle of taxation by consent. The taxes were done while there was no parliament \u2013 supposedly dating its roots to the Westminster system \u2013 even to rubber stamp it.<\/p>\n

The principle of taxation of consent was established by the British Magna Carta after King John slapped a series of taxes known as scuttage; in the style Sri Lanka now slaps taxes without prior discussion on barons.<\/p>\n

However barons, who had soldiers on their own, could fight back, unlike unarmed citizens of a modern nation state.
\nRoyal prerogative on tax was formally abolished by the British Bill of Rights after William and Mary took the throne.<\/p>\n

In Sri Lanka taxes were cut administratively in 2019 December apparently by \u201cPresident\u2019s Prerogative\u2019 by interventionist economists to target a \u2018persistent output gap\u2019 with a deficit (fiscal stimulus).<\/p>\n

Money was then printed by the central bank in large volumes to trigger excessive outflows and imports, make it impossible to collect dollars to repay debt from current inflows and eventually a pegged exchange rate was broken plunging the people into penury.<\/p>\n

Courtesy:Economy Next<\/em><\/p>\n

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Sri Lanka had no practice of revealing International Monetary Fund programs to parliament early and tax changes can only be revealed to the parliament at the time of implementation, Central Bank Governor Nandalal Weerasinghe said. Sri Lanka has had 16 IMF programs in the past after balance of payments trouble was triggered by Sri Lanka\u2019s …<\/p>\n

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