POWER POLITICS

It is said that Kotelawala made an application to the Central Bank for the transfer of a large sum of money to Britain for the purchase of property. NU mentioned that the application was made during the first premiership of Dudley Senanayake, “as financial protection from unsettling forces which he [Kotelawala] felt would overtake the country” (N.U. Jayawardena, c.1985, p.62).

- By Kumari JAYAWARDENA AND JENNIFER MORAGODA

According to the Central Bank and Exchange Control regulations at that time, the transfer of such a large sum was not permissible, and would have violated existing regulations. As such, NU recommended the refusal of Kotelawala’s application to the Finance Minister J.R. Jayewardene and Prime Minister Dudley Senanayake. This action would have serious repercussions in the future. NU’s daughter describes this episode:

When my father was in the Central Bank, Sir John Kotelawala applied for special approval to remit funds to the United Kingdom, which exceeded the legally approved limit. My father in his tactless way said that he could not do this but that Sir John was welcome to change the law and that my father would grant him the required permit after this was done. My parents always maintained that Sir John Kotelawala never forgave my father for the stand he took on his request. (Neiliya Perera, personal recollections)

To shed some light on the reasons for NU’s stance on the issue, it is important to note that, while the “Rubber Boom” of 1950-51 (at the time of the Korean War) had permitted Sri Lanka to enjoy a brief spell of economic prosperity, due to an increase in the export price of rubber, by 1952 the Central Bank had warned the government about worsening economic conditions and began to reimpose “certain restrictions of [foreign] remittances” (Central Bank, c.1975, p.41). In mid-1952, the government also launched a programme that was “primarily designed to conserve foreign exchange and to eliminate the budget deficit” (ibid, p.49). However, in 1953, an adverse balance of trade still existed, leading to cash shortages, and the government had to obtain a sterling loan from the British government to bridge the gap. NU accompanied OEG, the Finance Minister, to Britain in 1953 to negotiate this loan, and did so again in 1954 to negotiate a further loan (Ranasinghe, 1972, p.306).