Sri Lanka Central Bank Chief Won’t Seek Extension Until Absolved

  • Governor’s tenure mired in controversy since taking office
  • Parliament panel started a new investigation this year

Sri Lanka central bank Governor Arjuna Mahendran won’t seek an extension when his term expires on June 30 until a panel investigating allegations of nepotism exonerates him, the government said in a statement on Friday.

Mahendran, a former HSBC Holdings Plc wealth manager, has seen his tenure mired in controversy since taking office in January 2015. He has faced allegations that his son-in-law -- the head of a local brokerage -- benefited from sovereign bond sales, as well as accusations of lavish personal spending on his official expense account.

Mahendran’s decision to not seek an extension may blunt attacks by the opposition and anti-corruption activists against the government for hiring a Singaporean citizen to run the central bank. While under Mahendran’s tenure Sri Lanka’s rupee dropped 10.7 percent, making it one of Asia’s worst-performing currencies, the governor revamped the central bank by moving to an inflation target, and helped in procuring a loan from the International Monetary Fund.

“It is more prudent not to reappoint him and hold a proper investigation that would exonerate him,” Jayadeva Uyangoda, professor of political science at the University of Colombo, said by phone before the government’s statement. “The government may not be weakened as the opposition is in disarray, but its political legitimacy is affected and it could hurt in the long run.”

Mahendran did not answer multiple calls made to his mobile phone. The central bank’s press office will issue a statement once there’s clarity on the matter, Shellomi Gunawardena, director at the bank’s communications department said. Finance Minister Ravi Karunanayake said it was “too premature,” to comment.

A government panel probing the debt auctions last year found no involvement by Mahendran, and the central bank has rejected allegations that he misused public funds. Yet the Committee on Public Enterprises, which monitors financial discipline in state organizations, opened a fresh investigation this year. A group consisting of political and civil society members began street protests Friday and anti-corruption activists sought his removal as he’s a Singaporean citizen.

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