The Committee on Public Finance (COPF) has presented a report concerning the recent salary increase of the staff of the Central Bank of Sri Lanka (CBSL). The request for this report came from the President in his role as the Minister of Finance, following concerns raised by Members of Parliament and the public regarding the substantial salary hike. COPF deliberated on this matter extensively, considering information provided by the CBSL Governing Board and the Attorney General, both during a physical meeting in Parliament on 5th March 2024 and through subsequent correspondence.
Independence of the Central Bank
COPF acknowledges the critical role of CBSL's independence in executing monetary policy, a right granted under the new Central Bank of Sri Lanka Act, No. 16 of 2023 (CBSL Act). The Committee recognizes the authority of CBSL in achieving the inflation target, established in collaboration with the Minister of Finance and officially gazetted. Furthermore, COPF affirms CBSL's administrative and financial autonomy, including the authority to decide on staff remuneration.
Public Finance
In principle, COPF asserts that funds held by the country, excluding those owned by individuals or private entities as per the law, constitute public money or public finance. Therefore, 'Public Finance,' as outlined in Article 148 of the Constitution, extends beyond funds in the 'Consolidated Fund' specified in Article 149. COPF contends that CBSL earnings, apart from those designated for monetary policy and identified reserves, fall within the purview of public finance. This assertion is strengthened by Section 96 (1) of the CBSL Act, mandating that CBSL earnings, after complying with provisions 96 (1) (a) and (b), should be credited to the Consolidated Fund.
CBSL Accountability to Parliament
CBSL's accountability to Parliament, as outlined in Clause 5 and Clause 80 of the CBSL Act, is a crucial aspect highlighted by COPF. This accountability was reaffirmed by the Supreme Court Determination on the CBSL Bill, emphasizing transparency and accountability to the Executive, Parliament, and the People of the country.
COPF Opinion on CBSL Salary Increase
Regarding the recent across-the-board increase in staff remuneration, COPF opines that while CBSL possesses the autonomy to implement such increases, it remains accountable to Parliament, especially considering the economic challenges faced by the nation. The Committee finds the blanket increase in salary components unreasonable, suggesting that significant increases may be justified for selected professional staff categories but not across all staff.
Recommendation
Based on correspondence between COPF and CBSL on a possible solution to the issue without jeopardising the independence of CBSL, and with special reference to CBSL letter to COPF dated 16.03.2024 titled “Central Bank of Sri Lanka Salary Revision 2024-2026”, COPF recommends that the Minister of Finance immediately appoint an independent remuneration committee with the concurrence of the Governor CBSL to review the salary increase under discussion. COPF recommends that a report on the same be submitted to COPF within 4 weeks and that CBSL defer the salary increase until a mutually acceptable solution is arrived at, based on the findings of the report.
Members of this committee shall be co-opted from CBSL as well as from outside CBSL; both within and outside the public sector as necessary.
COPF expects this committee to arrive at reasonable adjustments in remuneration for all staff categories, keeping in mind the expertise of the specialised staff and comparability of the same as relevant to CBSL. It is strongly recommended that the methodology for determining salaries of professional staff be decoupled from non-professional and minor staff.
COPF also recommends that this committee arrive at a transparent formula for future revisions to CBSL staff remuneration.
COPF anticipates that these recommendations will lead to a fair and balanced resolution, ensuring the independence of CBSL while upholding accountability to Parliament and the public.
Independence of the Central Bank
COPF acknowledges the critical role of CBSL's independence in executing monetary policy, a right granted under the new Central Bank of Sri Lanka Act, No. 16 of 2023 (CBSL Act). The Committee recognizes the authority of CBSL in achieving the inflation target, established in collaboration with the Minister of Finance and officially gazetted. Furthermore, COPF affirms CBSL's administrative and financial autonomy, including the authority to decide on staff remuneration.
Public Finance
In principle, COPF asserts that funds held by the country, excluding those owned by individuals or private entities as per the law, constitute public money or public finance. Therefore, 'Public Finance,' as outlined in Article 148 of the Constitution, extends beyond funds in the 'Consolidated Fund' specified in Article 149. COPF contends that CBSL earnings, apart from those designated for monetary policy and identified reserves, fall within the purview of public finance. This assertion is strengthened by Section 96 (1) of the CBSL Act, mandating that CBSL earnings, after complying with provisions 96 (1) (a) and (b), should be credited to the Consolidated Fund.
CBSL Accountability to Parliament
CBSL's accountability to Parliament, as outlined in Clause 5 and Clause 80 of the CBSL Act, is a crucial aspect highlighted by COPF. This accountability was reaffirmed by the Supreme Court Determination on the CBSL Bill, emphasizing transparency and accountability to the Executive, Parliament, and the People of the country.
COPF Opinion on CBSL Salary Increase
Regarding the recent across-the-board increase in staff remuneration, COPF opines that while CBSL possesses the autonomy to implement such increases, it remains accountable to Parliament, especially considering the economic challenges faced by the nation. The Committee finds the blanket increase in salary components unreasonable, suggesting that significant increases may be justified for selected professional staff categories but not across all staff.
Recommendation
Based on correspondence between COPF and CBSL on a possible solution to the issue without jeopardising the independence of CBSL, and with special reference to CBSL letter to COPF dated 16.03.2024 titled “Central Bank of Sri Lanka Salary Revision 2024-2026”, COPF recommends that the Minister of Finance immediately appoint an independent remuneration committee with the concurrence of the Governor CBSL to review the salary increase under discussion. COPF recommends that a report on the same be submitted to COPF within 4 weeks and that CBSL defer the salary increase until a mutually acceptable solution is arrived at, based on the findings of the report.
Members of this committee shall be co-opted from CBSL as well as from outside CBSL; both within and outside the public sector as necessary.
COPF expects this committee to arrive at reasonable adjustments in remuneration for all staff categories, keeping in mind the expertise of the specialised staff and comparability of the same as relevant to CBSL. It is strongly recommended that the methodology for determining salaries of professional staff be decoupled from non-professional and minor staff.
COPF also recommends that this committee arrive at a transparent formula for future revisions to CBSL staff remuneration.
COPF anticipates that these recommendations will lead to a fair and balanced resolution, ensuring the independence of CBSL while upholding accountability to Parliament and the public.
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