Insolvent Sri Lanka should swap its central bank with currency board

Currency boards are typically associated with lower inflation, higher economic growth and smaller fiscal deficits when compared with hard pegs that are supported by promises, rather than protocols

What was good for Sri Lanka under British colonial rule 75 years ago may be worth a try again. Or at least that’s what Mark Mobius, the former emerging markets guru at Franklin Templeton Investments, seems to be suggesting. To regain the confidence of investors, the bankrupt Indian Ocean island could consider swapping its central bank with a currency board, he says.

Mobius has a point. A central bank with discretionary power over domestic interest rates wields enormous power, but not all can exercise it responsibly. If powerful politicians — like Sri Lanka’s President Gotabaya Rajapaksa and his brothers —