Sri Lanka Finance Minister attacks a pillar of regulatory independence

Posted on November 15, 2016  /  0 Comments

The legislation creating the Public Utilities Commission and the Telecom Regulatory Commission specifically provide for the regulatory bodies to have their own funds. The Minister of Finance in the 2017 Budget has announced he intends to expropriate the money in the funds and give it out on request. My response in today’s Daily FT:

It is customary for independent, sector-specific regulatory agencies to have a separate fund. The agency is operated with fees and other payments from the entities that it regulates that go into this fund. The principal rationale is insulation from pressure that could be exerted by the Government which could use disbursements from the consolidated fund as a carrot or a stick. The other, weaker, rationale is that paying salaries from money raised outside the consolidated fund would allow payments higher than government and would therefore serve to attract higher-quality employees.

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This is not to deny there is room for improvement in the management and accountability of these funds, especially after Rs. 600 million of the TRC’s money was spent on silredi distribution during the 2015 Presidential Election. The Telecom Regulatory Commission is governed by an archaic law dating from 1991 that is in urgent need of total overhaul, including, but not limited to, the financial safeguards for its over-large fund.

When advising governments on the design of regulatory agencies, I have emphasised the importance of transparent budgets and work programs. Amounts in excess of a specified percentage above the approved requirements should go to the consolidated fund, leaving no room for silredi temptations. But never would I recommend that regulatory agencies should go hat in hand to Treasury to get the funds required for their operations, knowing that even absent mala fides, Treasury is routinely short of cash.

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