Colombo, Apr 4 (PTI) Sri Lanka's Supreme Court has determined that the proposed Central Bank (Amendment) Bill was not unconstitutional, Speaker Mahinda Yapa Abeywardena said on Tuesday.

The proposed bill aims to provide autonomy to the Central Bank of Sri Lanka without undue influence from the fiscal authorities or the government.

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Speaker Abeywardena told Parliament on Tuesday that the bill was found consistent with the Constitution of Sri Lanka and therefore it only needs a simple majority vote for its adoption with amendments.

He added that the bill would have easy parliamentary passage according to a determination on the draft law issued by the Supreme Court.

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The Supreme Court entertained seven petitions, including one from the Central Bank Employees Union challenging the bill's constitutionality.

Central Bank Governor Nandalal Weerasinghe, last month, cited the lack of independence of the Central Bank in determining the monetary policy as a reason for the country's unprecedented economic crisis that led the island nation to declare bankruptcy.

"In 2020, 2021 and 2022, the policy interest and exchange rates were fixed without the Central Bank," Weerasinghe said, hinting that these were politically determined.

He added that the exchange rate to the US dollar was fixed at Rs 203, which led to the total loss of the bank's reserves.

Weerasinghe said it was crucial to let the Central Bank act independently to determine the policy interest rate and exchange rates.

"The omission of the Secretary to the Treasury from influencing the monetary policy is a new welcome feature," he added.

The Secretary to the Treasury is left out of the 11-member monetary policy board and the 7-member governing board under the proposed bill.

“What happened was the Treasury unduly influenced the monetary policy in favour of the fiscal policy, that is why our key policy indicators (KPI) dipped by 50 per cent,” Weerasinghe said.

The independence of the Central Bank and other tax and revenue reforms were part of the work to unlock the Washington-based International Monetary Fund facility of a 2.9 billion dollar bailout.

The IMF's Executive Board approved a 48-month extended arrangement under its Extended Fund Facility (EFF) last month with an amount of SDR 2.286 billion (about USD 3 billion) to Sri Lanka.

The Sri Lankan government in May last year declared a debt default on over USD 51 billion in foreign loans -- a first in the country's history. PTI CORR AKJ

(The above story is verified and authored by Press Trust of India (PTI) staff. PTI, India’s premier news agency, employs more than 400 journalists and 500 stringers to cover almost every district and small town in India.. The views appearing in the above post do not reflect the opinions of LatestLY)