News
Govt. has to stop money printing now, not in 2024: Harsha
ECONOMYNEXT –Sri Lanka should stop money printing earlier than indicated in a statement by Prime Minister Ranil Wickremesinghe, opposition legislator Harsha de Silva said, though legislators have already given extensive powers to the agency engage in liquidity injections.
“Prime Minister Ranil Wickremesinghe talked about money printing,” de Silva told parliament.
“He said, the inflation is going up and the printing should be stopped. But he also said it can only be stopped by the end of 2023 or in early 2024,” Silva said.
“It cannot happen like that and you have to take a decision right now. We all must understand that if nothing is being done, the inflation will go up until 100 percent from the predicted 60 percent.”
Silva the country has already become an unlivable place for the general public and according to the CBSL data, the food inflation of the country has risen up to 80.1 percent in June, 2022.
Sri Lanka’s central bank has now created the worst currency crisis in its 72-year history.
Sri Lanka’s intermediate regime central bank was set up as a fundamentally flawed Latin America style agency with dual anchor conflicts in 1950 by US money doctor, giving soft-peggers the ability to trigger currency crises and high inflation abolishing a currency board where money printing was outlawed up to then.
However the agency had no active open market operations in the initial stages and it was restrained by a gold peg.
A reserve collecting peg collapses when the central bank prints money to keep rates down. Sri Lanka’s central bank repeatedly prints money whenever domestic credit picks up, regardless of whether state or private credit is picking up including when the US hikes rates under pseudo monetary policy independence, with devastating consequences on the people, critics have said.
However after 2015 with flexible inflation targeting the rupee was hit with extreme open market operations, to target an output gap (printing money to push growth up) creating currency crises and pushing growth down in their wake and impoverishing the people with rupee depreciation.
Under ‘flexible’ inflation targeting a reserve collecting peg was repeatedly bombarded with liquidity injections to manipulate rates down (call money rate targeting) until the currency collapsed.
The currency was depreciated under real effective exchange rate targeting including in 2017 when there was not credit pressure and the rupee was facing upward pressure and large volumes of inflows were sterilized, as growth and private credit slowed.
There is nothing politicians in Sri Lanka can do, whether in power or in opposition when Sri Lanka’s central bank decides to print money to drive interest rates down.
“I don’t know whether you can take that decision now because Nandalal Weerasinghe has been appointed as the CBSL governor,” de Silva told Prime Minister Wickremesinghe perhaps in a reference to central bank independence.
In 2018 as credit recovered, de Silva pleaded with the then leadership with of the central bank in vain to allow rates to go up as the currency was hit with liquidity injections, after giving ‘central bank independence’, to the agency during the ousted ‘Yahapalana’ administration.
Fiscal dominance including de facto fiscal dominance was removed by the Finance Minister Mangala Samaraweera raising taxes, bringing the deficit down and market pricing fuel in 2019.
The central bank printed money anyway ignoring political pleas and busted the currency from 152 to 182 and drove away foreign investors in rupee bond by undermining the credibility of the peg.
However politicians have the legislative power to tame soft-pegging central bank into either hard pegs or true currency boards like Hong Kong, or currency board like pegs like in East Asia and GCC countries with restricted open market operations.
They can also curb flexible pegs with true inflation targeting and a clean floating exchange rate which will also eliminate balance of payments crises and poverty.
Over the past 7 years three currency crises were created in rapid succession under flexible inflation targeting and output gap targeting.
In the 2020-22 crisis, where over 2.6 trillion rupees were printed the rupee has now fallen from 200 to 360 to the US dollar with soft-peggers impoverishing both wage earners and the elderly.
In the 2020-2022 crisis, the banking system was pumped with excess liquidity of up to 200 billion rupees under modern monetary theory up from around 60 billion rupees under call money rate targeting and output gap targeting, which is a milder version of MMT.The entire world is now suffering from liquidity injections made by the Federal Reserve under its dual mandate which is being conveniently blamed on Russia and Ukraine.
News
President calls on Atamasthanadipathi Thero
President Anura Kumara Dissanayake called on the Atamasthanadhipathi, Chief Sanghanayake of Nuwara Kalaviya, Most Venerable Pallegama Hemarathana Nayake Thero, this morning (07) for a brief discussion.
During the meeting, the President apprised the Thero of the measures being implemented by the government to provide relief to the affected people and to restore normalcy in their daily lives.
News
US deploys two C-130J Super Hercules aircraft and personnel to assist in relief measures
The United States has extended humanitarian assistance to Sri Lanka to support nationwide relief efforts in the aftermath of Cyclone Ditwah, which caused severe damage across multiple regions of Sri Lanka.
The latest round of assistance, included the deployment of two C-130J Super Hercules aircraft, equipment and US Air Force personnel. The US contingent will provide vital transportation and logistics support in areas identified by the Disaster Management Centre.
A formal handover took place this afternoon (07) at the Bandaranaike International Airport (BIA) with the support officially received on behalf of the Sri Lankan government by Minister of Science and Technology Prof. Chrishantha Abeysena, Deputy Minister of Ports and Civil Aviation, Janitha Ruwan Kodithuwakku and Deputy Minister of Defence Maj. Gen. Aruna Jayasekara (Rtd).
The assistance was presented by the United States through Julie Chung, Ambassador of the United States to Sri Lanka, and Lt. Col. Van Pinxteren of the United States Air Force.
As part of the support package, the United States contingent will provide logistics capacities needed to transport humanitarian supplies to affected communities in the Northern, Eastern and Central regions.
Sri Lankan officials expressed their gratitude for the timely support, which will bolster ongoing national efforts to reach displaced families and restore essential services in cyclone-affected areas.
Latest News
Government prepares Anuradhapura farmers for Maha Season
President Anura Kumara Dissanayake instructed officials to prepare the farmers in the Anuradhapura District whose paddy cultivation was destroyed due to floods to re-cultivate during the upcoming Maha season.
Highlighting the need for all relevant institutions to work in proper coordination, treating this as a national necessity, the President instructed the authorities to provide compensation to farmers without delay and to ensure temporary irrigation water supply through provisional repairs.
The President further noted that the government is providing the highest amount of compensation in the country’s history for crop damages, with the expectation that cultivation activities will be commenced again promptly.
President Anura Kumara Dissanayake gave these instructions this morning (07) while attending a special coordination committee meeting at the Anuradhapura District Secretariat to review the programme being implemented to restore normalcy to the lives of people affected by the disaster situation and to rehabilitate damaged infrastructure in the district.
The President instructed officials to present, before this Friday, a report detailing the number of farmers who were completely affected, the extent of damaged farmland and the required financial allocations. He emphasised that compensation must be granted only to those who are genuinely entitled and that no one should receive it unjustly.
The President stated that the government is committed to providing compensation to the farming community and directed officials to foster confidence among farmers so that they will be encouraged to resume cultivation.
The President also inquired, separately, from the relevant institutions about the measures taken for the development of the district’s infrastructure including highways, irrigation and communication networks.
The President examined the programme for reopening obstructed roads and instructed that temporary repairs be expedited to meet the public’s transportation needs until permanent road development plans are implemented.
Officials of the Ceylon Electricity Board informed the meeting that 473 out of the 580 electricity transformers damaged due to the disaster have already been restored and that full electricity supply to the district could be achieved by tomorrow.
They further stated that 49,000 water connections had been affected, of which about 99% have now been restored, while water is being supplied by bowsers to the remaining areas. They noted that total restoration of water supply is expected within the next two days. Damaged community water projects are also being restored.
Well-cleaning activities are currently being carried out with the support of the Navy and the President instructed officials to complete these tasks swiftly through community participation coordinated by Divisional Secretariats.
Discussions were also held regarding the provision of compensation for crops such as Maize, restarting cultivation, restoring the livelihoods of those engaged in animal husbandry, normalising health services and rehabilitating religious sites including damaged temples.
The floods have caused total damage to 228 houses in the district. The President instructed officials to gather accurate information on whether affected families should be resettled on the same land or relocated elsewhere and to begin identifying suitable land for resettlement.
Officials reported that all schools in the district could reopen by 16 December. The President instructed that the Rs. 15,000 allowance promised by the Treasury for schoolchildren affected by the disaster be fully distributed before 31 December and that the list of beneficiaries be prepared without delay.
The President also expressed his gratitude to government officials, the Police and the Tri-Forces for their service in providing relief to the public and restoring infrastructure.
The meeting was attended by Co-Chair of the Anuradhapura District Development Committee, Minister of Trade, Commerce, Food Security and Cooperative Development Wasantha Samarasinghe, Minister of Housing, Construction and Water Supply Susil Ranasinghe , Anuradhapura District MPs Susantha Kumara Navaratna and Sena Nanayakkara, North Central Province Governor Wasantha Jinadasa, Chief Secretary J.M.R.P. Jayasinghe, representatives of local authorities; Secretary to the Treasury Dr Harshana Suriyapperuma, Anuradhapura District Secretary K.G.R. Wimalasuriya, ministry secretaries and other government officials.
-
News5 days ago
Lunuwila tragedy not caused by those videoing Bell 212: SLAF
-
News4 days agoLevel III landslide early warning continue to be in force in the districts of Kandy, Kegalle, Kurunegala and Matale
-
Latest News6 days agoLevel III landslide early warnings issued to the districts of Badulla, Kandy, Kegalle, Kurunegala, Matale and Nuwara-Eliya
-
Features6 days agoDitwah: An unusual cyclone
-
Latest News7 days agoUpdated Payment Instructions for Disaster Relief Contributions
-
News2 days agoCPC delegation meets JVP for talks on disaster response
-
Business2 days agoLOLC Finance Factoring powers business growth
-
News2 days agoA 6th Year Accolade: The Eternal Opulence of My Fair Lady
