THE CENTRAL BANK

CHAPTER 13 (Excerpted from N.U. JAYAWARDENA The first five decades)

- By Kumari JAYAWARDENA AND JENNIFER Moragoda

In studying Ceylon’s economic and financial problems, I have drawn heavily upon Mr. N.U. Jayawardena’s unrivalled understanding of the operations of the Ceylon economy.

(John Exter, 1949, The Exter Report, p.56)

NU’s Rise to the Top

The peak of NU’s career in the public service — and what he considered the most gratifying period in his professional life — was his rise to become Deputy Governor, and then Governor, of the newly created Central Bank of Ceylon. While his period in the bank lasted four years, his term as Governor, which was cut short, lasted just sixteen months. However, his legacy is such that the creation of the Central Bank is inextricably linked with his name, as NU had been closely associated with the Bank even in its embryonic stages and had set up exchange control operations, which became the largest department of the Central Bank during its early years. The experience accumulated during his period in government service, along with his economic and business administration training, made him one of the few government officials who grasped the theoretical dimensions of the role of a central bank. As Controller of Exchange he also had experience in some of the functions of central banking.

Many countries of Asia and Africa in the postcolonial phase regarded the creation of a central bank as both an economic necessity and a symbol of political prestige, marking the shift from colonial rule to national independence. The well-known writer on central banking, R.S. Sayers, of the London School of Economics, notes that: “Colonies which have become politically independent have regarded a central bank as an outward and visible sign of independence, and the lack of one as signifying continued subjection,” adding that this has been “an important aspect in Ceylon and Burma, where central banks have been established since the [Second World] War” (Sayers 1982, p.114, emphasis added).