Central Banks Are not Strangers to Unpopularity

Abstract

The Central Bank of Sri Lanka (CBSL) celebrates its 70th Anniversary on 28 August 2020. The establishment of the CBSL was a proud moment in the post-independence history of Sri Lanka. The Bank, as the apex financial authority in the country, is entrusted with the mandates of maintaining economicand price stability and financial system stability. These two objectives are complementary to each other and they affect all sectors of the economy. Central banks worldwide were called upon to be risk managers during the Global Financial Crisis (GFC) of 2007-09, followed by the Great Recession. Quantitative Easing, which fast-tracked implementation of lender of last resort policies and overhauling financial regulatory regimes were some of the key measures executed by central banks in response to the said crisis. While financial systems and economies werestruggling to restore stability, and wipe off the scars of GFC, there came COVID-19 pandemic with devastating impacts on almost all sectors. Central banks have been required again to find solutions to COVID-19 induced instabilities. At this very special moment of CBSL’s 70th Anniversary, this article is dedicated to discussing challenges faced by central banks during this unprecedented crisis.