News

Central Bank: No immediate threat of inflation rise from monetary expansion

Published

5 years ago

2021/05/17

By Sanath Nanayakkare

Sri Lanka was currently experiencing high monetary expansion, but the Central Bank did not expect an acceleration of inflation in the near future, Economic Research Director at the Central Bank Dr. Chandranath Amarasekara told The Island yesterday.

Answering a query on the broad money growth and its wider implications, Dr. Amarasekera said, “At the end of 2020, broad money expanded by 23.4% compared to the end 2019. The extraordinary circumstances caused by the COVID-19 pandemic required increased credit to the government from Sri Lanka’s banking system, and the historically low interest rate structure also resulted in a pickup in the growth of credit to the private sector in the second half of the year. This policy driven expansion in broad money supply was essential for the country to dampen the effects of the economic downturn caused by the pandemic.”

“As the Sri Lankan economy is operating below its potential, we do not project a demand-driven acceleration in inflation in the near term. Even the relatively high economic growth projected for 2021 will be partly driven by the low base in the previous year, and therefore, it is unlikely that there will be an overheating of the economy in 2021 as well, although we envisage a monetary expansion of 21%.”

“However, as the authority responsible for the money stock of the country, the Central Bank remains cautious about any excessive expansion in money growth. Nevertheless, the close relationship between money and inflation that we used to see in the past is no longer in existence. For example, during the most part of a period of single digit inflation that Sri Lanka experienced since 2009, broad money growth has remained above 15%. The breakdown of the close relationship between money growth and inflation is also one reason for the Central Bank to move away from a monetary targeting framework towards a flexible inflation targeting framework to conduct monetary policy. Anchoring of inflation expectations has also helped curb the inflationary effects of exchange rate movements as well. Many other countries have also experienced similar situations.”

“When the economy recovers and demand conditions improve, the Central Bank will take appropriate action to make necessary policy adjustments to ensure the continuation of inflation at the desirable levels of mid-single digits without disrupting the growth process,” Dr. Amarasekara said.

All News Advertisement

Latest News

Deep Depression likely to cross the Sri Lankan coast between Trincomalee and Jaffna during the morning today (10 January 2026)

Published

60 mins ago

2026/01/10

Priyan

Warning for deep depression to the East of Sri Lanka.
Issued by the Natural Hazards Early Warning Centre of the Department of Meteorology at 01.30 a.m. on 10 January 2026 for the period until 01.30 a.m. on 11 January 2026

The deep depression over the southwest Bay of Bengal was located about 50 km North-northeast of Trincomalee at 01:00 a.m. on 10 January 2026. It is very likely to move northwestwards and cross the Sri Lankan coast between Trincomalee and Jaffna during the morning today (10 January 2026).

Latest News

Landslide RED warnings issued to the Divisional Secretaries Divisions of Ududumbara, Nildadndahinna and Walapane

Published

18 hours ago

2026/01/9

Priyan

The landslide early warning center of the National Building Research Organisation [NBRO] has issued RED warnings to the districts of Kandy and Nuwara Eliya for the next 24 hours effective from 0900 hrs today [09th January].

Accordingly,
LEVEL III RED landslide early warnings have been issued to the Divisional Secretaries Divisions and surrounding areas of Ududumbara in the Kandy district, and Nildandahinna and Walapane in the Nuwara Eliya district.

LEVEL II AMBER landslide early warnings have been issued to the Divisional Secretaries Divisions and surrounding areas of Wilgamuwa in the Matale district, and Mathurata and Hanguranketha in the Nuwara Eliya district.

LEVEL I YELLOW landslide early warnings have been issued to the Divisional Secretaries Divisions and surrounding areas of Uva Paranagama, Welimada, Kandaketiya, Badulla, Meegahakiwula, Hali_Ela, Passara and Lunugala in the Badulla district, Minipe in the Kandy district, Ambanganga Korale, Ukuwela, Rattota, Naula and Laggala_Pallegama in the Matale district, and Nuwara Eliya in the Nuwara Eliya district.

Latest News

A Policy is being formulated to ensure Child Protection in the use of Technology — Prime Minister

Published

21 hours ago

2026/01/9

Priyan

Prime Minister Dr. Harini Amarasuriya stated that a policy is currently being formulated to ensure child protection in the use of technology.

The Prime Minister made this statement on Thursday (08) in Kandy while briefing the Most Venerable Mahanayake Theros of the Asgiriya and Malwathu Chapters on the issue that has arisen regarding the Grade 6 English module. Thereafter, printed copies of all modules were presented to the Mahanayake Theros.

Earlier on Thursday (08), the Prime Minister visited the Malwathu Viharaya in Kandy and met the Most Venerable Thibbatuwawe Sri Siddhartha Sumangala Nayaka Thero, the Mahanayake of the Malwathu Chapter, where she explained the error that had occurred in the first print run of the English module for Grade 6 .

The Mahanayake Theros emphasized that education is a sensitive subject and that such matters should be handled with greater sensitivity and proper oversight. They further advised that a formal investigation should be conducted and that education reforms should be carried forward in a systematic manner.

Subsequently, the Prime Minister visited the Asgiriya Maha Viharaya and met the Most Venerable Warakagoda Sri Gnanarathana Mahanayaka Thero of the Asgiriya Chapter, where she clarified the error related to the English module.

The Mahanayake Thero noted that education reforms are a timely necessity and should be implemented with due oversight and careful review and also pointed out that there are broader issues in Sri Lanka regarding the use of technology, which are evident in the manner in which modern tools such as AI technologies are being used on social media.

Clarifying the issue Prime Minister Dr. Harini Amarasuriya further stated,

“We have appointed a committee to look into this issue, and based on the recommendations of the National Institute of Education (NIE), steps were taken to remove the relevant lesson. In addition, all printed copies of the relevant module have been stamped, and no module has been distributed to schoolchildren. A formal investigation into this matter has been initiated by the Ministry, and a complaint has also been lodged with the Criminal Investigation Department.

At the same time, we are in the process of formulating a policy on child protection in the use of technology”.

Thereafter, addressing the media and responding to the’ questions raised by journalists, the Prime Minister stated:

“The Opposition is attempting to use this national task for their own political advantage. However, many in society have expressed their views on the issues that have arisen in a positive manner, with the objective of identifying and correcting mistakes. The government has decided to move forward with education reforms by recognizing the error that have occurred and rectifying them. We will take the no-confidence motion brought by the Opposition as an opportunity to further advance dialogue on education reforms”

The occasion was graced by the Most Venerable Anunayaka Thero of the Asgiriya Chapter, Venerable Narampanawe Ananda Nayaka Thero; Deputy Registrar of the Asgiriya Chapter, Venerable Muruddeniye Dhammarakkhita Thero; Deputy Registrar of the Malwathu Chapter, Venerable Mahawela Rathanapala Thero; Members of Parliament Thushari Jayasinghe and Thanura Dissanayake; Mayor of Kandy Chandrasiri Wijenayake; Secretary to the Ministry of Education Nalaka Kaluwewa; and Secretary to the Ceylon Teachers’ Union in Central Province D. D. Wimalaweera.