Central Bank says it merely executed government instructions

USD 2.5 million sovereign debt payment:

The Central Bank merely carried out the controversial USD 2.5 million sovereign debt payment in accordance with instructions issued by the government, Central Bank Governor Dr. Nandalal Weerasinghe said yesterday, emphasising that the institution acted solely in its capacity as banker to the state.

Addressing a question at a public seminar, Dr. Weerasinghe explained that the Central Bank’s responsibility in such transactions is operational rather than supervisory. According to him, once the Ministry of Finance or the Treasury issues a payment order, the Central Bank processes the transfer exactly as instructed, without involvement in determining the beneficiary or the broader decision-making process behind the payment.

The Governor’s remarks came in response to a query regarding the widely discussed USD 2.5 million sovereign debt repayment reportedly sent to a party in Australia and later alleged to have been siphoned off by a cyber criminal.

“The Central Bank is the banker to the government just as it is to commercial banks,” he explained. “When we receive a payment instruction from the Ministry of Finance or the Treasury, we execute that payment in line with the instructions given to us.”

He noted that the Central Bank credits the account specified by its client, in this case, the government — and subsequently informs the relevant authorities once the transaction has been completed. If a payment cannot be processed or is rejected by the banking system, the Bank notifies the client accordingly. And when a payment is successful, the client would receive a notification, he said.

However, Dr. Weerasinghe indicated that the Central Bank would not necessarily be aware if recipient details had been altered elsewhere in the chain of communication prior to the transaction reaching the Bank for execution.

The Governor also highlighted the institutional changes that took effect from January 1, 2026. He explained that when the Public Debt Department functioned under the Central Bank, the institution had a more direct role in sovereign debt management and decision-making. With the External Debt Department now operating under the Ministry of Finance, the Central Bank’s role has become largely facilitative.

Under the current arrangement, he said, the Bank simply processes payments on behalf of the government. If the Treasury provides funds in Sri Lankan rupees, the Central Bank converts them into US dollars before remitting the payment. Alternatively, the payment may be made from government accounts maintained at the Central Bank or from the country’s foreign reserves.

To simplify the explanation, Dr. Weerasinghe compared the process to an ordinary customer instructing a commercial bank to transfer money to a designated recipient. In such instances, the bank processes the transaction based on the customer’s instructions rather than independently verifying the account details of the recipient.

Through his remarks, the Governor strongly conveyed that the Central Bank had no involvement in the policy or decision-making aspects of the disputed payment and acted purely as the executing financial institution on behalf of the government.

By Sanath Nanayakkare

from The Island https://ift.tt/VRUbDW3