Central Bank's Sustainable Finance Roadmap: Fatally flawed

SRI Lanka's rise from the ashes following the economic collapse of 2022 owes largely to the competence of the Central Bank, especially its Governor, Dr. Nandalal Weerasinghe. It is easy to forget, however, that the country's economic collapse too, was precipitated largely by the Central Bank.

- By Rohan Pethiyagoda

This owed in large measure to the questionable competence of Dr. Weerasinghe’s predecessors, the ‘Modern Monetary Theorists’ Professor W.D. Lakshman and Ajith Nivard Cabraal, who believed inflation to be unrelated to money printing (see W.A. Wijewardena’s excellent explanation in the Daily FT at [1], below). The Central Bank’s Sustainable Finance Roadmap released earlier this month, however, is so full of holes and false assumptions that it surpasses in ridiculousness even the fundamentally flawed monetary mantra of the Cabraal-Lakshman Era.

My suspicions were first aroused when I noticed the factual assertion, “the poverty rate more than doubled between 2019 and 2022, rising from 11.3% to 25.0%” being attributed to the National Environmental Action Plan (2022), which makes no such claim. Then the Roadmap goes on to state that a new, ambitious target has been set: “an increase in forest cover from 29.7% to 32%” which is attributed to 'Global Carbon Budget'. I looked up this source but found that it makes no mention of this claim or even of Sri Lanka. This outlandish target, however, suggests that the Government will convert a further 150,000 ha of land, approximately the extent that is now under tea, into forest. However, pretty much all the unforested land in the country is already in some form of anthropogenic use. So, from where will this 150,000 ha come? The Roadmap does not say. The only place I could find the figure of 29.7% mentioned was in Wikipedia, but I suppose the Bank is embarrassed to mention Wikipedia as a source and so felt it necessary to invent one. As it happens, the most recent (2021) scientific assessment of gross forest cover, using high-resolution satellite imagery, estimated 29.2% [2].