August 21, 2007 (LBO) – Sri Lanka’s central bank law, devised by an international economist famed for his monetary prudence, has in-built safeguards to protect the economy unless it was abused, a top central banker said. Central Bank Deputy Governor W A Wijewardene defended the bank’s founder John Exter against a rising tide of criticism for leaving loopholes in the law that has allowed successive governments to print money, debauch the currency and de-stabilize the economy.
The bank Tuesday named its conference hall after Exter who was founder governor after its creation in 1951 based on his recommendations, known as the ‘Exter Report’.
Exter was a Federal Reserve official who is famed for his views against loose monetary policy and his relentless warnings against the dangers of fiat or paper money which can be issued in unlimited quantities by irresponsible governments.
Wijewardene argued that Exter was pragmatic and had no choice but to create a central bank which was what he was hired to do by the government at a time when the newly independent country had a currency board which had automatic safeguards against abuse.
“If he preferred a currency board, he should not