ECONOMYNEXT – Sri Lanka’s central bank staff could continue to get high salaries for up to five years, and not three years as set out in a collective agreement, a committee that went into the matter after a public outcry has recommended, a legislator said.
A panel that went into the salary hike that the central bank staff had paid themselves had criticized the salary hike and a defined benefit pension plan, but said changing it would lead to legal problems, Chairman of the Committee of Public Enterprises, Harsha de Silva said.
The Committee had said it was wrong to apply the same salaries to office assistants and management assistants as senior officers in ‘mission critical’ roles.
The office assistants and management assistants should be given the same salaries as the rest of the government.
The panel has said that individuals should be given increments on a ‘meritocracy’.
There was a recommendation that a human resources manager be appointed to carry out a study in 2025 and changes made.
There were four other alternative options including halting the salary hike.
Opposition legislator M A Sumanthiran had suggested that the final option of halting the salary hike be accepted, but the COPF had voted to go with the first one, de Silva said.
“The committee has recommended that the 2024-2026 be implemented not for three years, but also for another two years without any increment for five years,” de Silva said.
“They have said there is on average a 50 percent salary increment. But if the special analysis done in 2025 finds that a significant change should be done, that there was a chance to do that.”
The panel has recommended that a defined benefit pension plan be stopped.
However, the current leadership of the central bank had already decided to stop the practice of giving returns linked to the treasury bill yield.
In 2022 after interest rates went up following rate cuts of the previous two years, the salary bill for central bank staff was reported at 6.69 billion rupees, but there were pension contributions (including a post-benefit plan) of 13.6 billion rupees.
In 2023 there was write-back of 3.9 billion rupees.
Sri Lanka’s Treasury bill yields spike sharply to stop forex crises after the central bank prints money to cut policy rates under flexible inflation targeting or other regimes with anchor conflicts.
Sri Lanka also has exchange controls as a result of forex shortages coming from conflicts between money and exchange policies (targeting a policy rate without a clean float or conversely trying to collect reserves despite have a bureaucratically decided policy crate)
The agency started to create high inflation especially after 1978 operating what amounts to un-anchored monetary policy, with intensified anchor conflicts, critics have said.
The agency had also persuaded President Ranil Wickremesinghe to allow it to create between 5 to 7 percent inflation on its own recommendation, a target it was chasing in the run up to an external sovereign default, without specific legal sanction.
Critics have said the 5-7 percent inflation target not only amounts to un-anchored policy given the forex crises that country had run into especially after the end of a civil war generating similar or lower levels of inflation, but may also amount to de facto goal independence.
It is not fully clear why macro-economists in some so-called ‘third world’ countries insist on following third rate monetary regimes which trigger crisis after crisis from 1978 onwards in particular, while many others have moved onto operational frameworks that provide sounder money.
Before the ‘age of inflation’ parliaments including the mother of parliament’s in the UK have brought strict laws against the central banks to prevent chronic external troubles and high inflation.(Colombo/June19/2024 – Update II)