CBSL does not deny advising the government to hedge oil purchases

In a statement issued on Friday, the CBSL says the Cabinet granted approval to hedge purchase of petroleum products on 13 January 2007.

The CBSL was responding to allegations by Petroleum Resources Minister AHM Fowzie that the concept of hedging was initially suggested by CBSL Governor, Ajith Nivard Cabraal.

“Let me at the outset say that the oil hedging concept was not my concept at all. It was initiated by no lesser person than the Governor of Central Bank himself,” he told the parliament on Wednesday.

Cabinet 'granted approval'

The minister however, admitted that the Cabinet granted the approval for hedging deals but Minister Lakshman Yapa Abeywardene has repeatedly told media that no such approval was granted.

“The Governor of Central Bank urged in writing even before the Cabinet approval go for hedging,” Minister Fowzie added.

	Minister says the oil hedging concept was intiated by Mr. Cabraal

He made the special announcement after the Supreme Court suspended the services of the chairman of the Ceylon Petroleum Corporation (CPC) and recommend President Rajapaksa replace Minister Fowzie, who "safeguarded corrupt officials".

The court made the interim ruling after considering petitions against controversial hedging deals signed by the CPC chairman to control increasing fuel prices.

Sri Lanka is losing millions of dollars as a result of the deals, the court was told.

'Economic advisor'

The CBSL does not deny Minister Fowzie’s remarks that it advised the government to enter into hedging deals “as the economic advisor to the government”.

However, once the Cabinet approval was granted, the CBSL says, the advisory role was completed and the CPC was the sole authority to carry out its implementation.

“Accordingly, the CBSL was not, and indeed did not need to be, involved in the hedging transactions of the CPC,” the CBSL statement said.

It added that the CBSL has taken steps to examine the role of the commercial banks in hedging transactions.

“Nevertheless, at present, since hedging related issues are the subject of matter of judicial proceedings, the CBSL would refrain from making any comments in relation to current investigations,” it said.