News

Govt. has to stop money printing now, not in 2024: Harsha

Published

4 years ago

2022/07/10

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.

All News Advertisement

Latest News

“Let’s move forward together in unity to build a country where all labour is valued, rights are protected, and equality prevails” -PM

Published

12 hours ago

2026/05/1

Priyan

Prime Minister Dr Harini Amarasuriya in her May Day message called upon the working people in Sri Lanka to move forward together in unity to build a country where all labour is valued, rights are protected, and equality prevails.

The full text of the PM’s message:

The history of the Sri Lankan labour movement is a remarkable journey, shaped over decades by the blood, sweat, and sacrifices made in the pursuit of rights, justice, and dignity.

Beginning with the printers’ strike of 1893, the working people of this country emerged as an organised force. Through the trade union movement led by A. E. Goonesinha and the emergence of the Lanka Sama Samaja Party, the voice of labour gained political strength. The Railway Workers’ Strike of 1923 and the public service strike of 1947 reaffirmed that the true ’driving force’ behind the country’s economic and social transformation was its working people. I respectfully acknowledge the invaluable contributions of workers in the plantation sector, ports, railways, and across both the public and private sectors, whose dedication laid the foundation for many of the labour rights we benefit from today.

As we commemorate International Workers’ Day with dignity once again, we pay tribute to all working people across the world, including the heroic workers who sacrificed their lives in the struggle for an eight-hour workday in Chicago in 1886. This year’s May Day holds special significance as it is being celebrated under a government built through the power of the people, in honour of the entire working community of Sri Lanka.

Granting due respect to labour and safeguarding the rights of all working people are core policy commitments of our government. Accordingly, we remain dedicated to creating a fair and safe working environment by expanding existing services and implementing new programmes aimed at improving the living standards of working people.

Ensuring fair and equal access for all citizens is a fundamental objective of the government. Following that, it is our responsibility to create an environment in which everyone can lead a dignified professional life. Establishing a national social protection system that recognises unpaid labour and guarantees social security for unpaid labours is among the foremost priorities of our government.

On this May Day, we must reaffirm the importance of moving forward together in unity to build a country where all labour is valued, rights are protected, and equality prevails. With the strength and dedication of all working people, may we soon achieve the vision we all share: “A Thriving Nation – A Beautiful Life

Latest News

Heat Index at Caution Level at some places in the Northern, North-central, Eastern, Sabaragamuwa and North-western provinces and in Monaragala district during the day time

Published

17 hours ago

2026/05/1

Priyan

Warm Weather Advisory
Issued by the Natural Hazards Early Warning Centre
Issued at 3.30 p.m. on 30 April 2026, valid for 01 May 2026.

The Heat index, the temperature felt on human body is likely to increase up to ‘Caution level’ at some places in the Northern, North-central, Eastern, Sabaragamuwa, and North-western provinces and in Monaragala district during the day time.

The Heat Index Forecast is calculated by using relative humidity and maximum temperature and this is the condition that is felt on your body. This is not the forecast of maximum temperature. It is generated by the Department of Meteorology for the next day period and prepared by using global numerical weather prediction model data.

Effect of the heat index on human body is mentioned in the above table and it is prepared on the advice of the Ministry of Health and Indigenous Medical Services.

ACTION REQUIRED
Job sites: Stay hydrated and takes breaks in the shade as often as possible.
Indoors: Check up on the elderly and the sick.
Vehicles: Never leave children unattended.
Outdoors: Limit strenuous outdoor activities, find shade and stay hydrated.
Dress: Wear lightweight and white or light-colored clothing.

Note:
In addition, please refer to advisories issued by the Disaster Preparedness & Response Division, Ministry of Health in this regard as well. For further clarifications please contact 011-7446491.

News

USD 2.5 mn fraud probe: Interdicted MoF official found dead at home

Published

17 hours ago

2026/05/1

Thilina Walpola

An Assistant Director of the External Resources Department (ERD) of the Ministry of Finance, interdicted pending an investigation into the diversion of US$2.5 million in Treasury funds to a rogue account was found dead at his residence in Kuliyapitiya.

The deceased has been identified as Ranga Nishantha, 50.

Police said the officer had been found in the garden of his house and they believed that the officila had committed suicide. However, investigators have not ruled out other possibilities, and inquiries are continuing.

The official was interdicted along with three other senior Finance Ministry officials over a cyber-enabled financial fraud.

Those interdicted include a Director and an Assistant Director from the ERD, as well as a Director and an Additional Director General from the Public Debt Management Office (PDMO).

Police sources said that the CID had on two occasions asked Nishantha to make a statement in connection with the ongoing investigation, but he had failed to comply.

Police said the CID probe into the alleged cyber fraud is continuing, with investigators examining the circumstances surrounding the diversion of funds through compromised communication channels.Kuliyapitiya Police said further investigations were underway to establish the exact cause of death.