Connect with us

News

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

Published

4 years ago

on

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.


Related Topics:
Continue Reading
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Latest News

A strong Technical and Vocational Education and Training (TVET) system equips individuals with practical, relevant, and future-oriented skills helping to innovate responsibly towards a greener and sustainable future – PM

Published

9 hours ago

on

2026/03/26

By

The Prime Minister, Minister of Education, Higher Education and Vocational Education Dr. Harini Amarasuriya participated as the Chief Guest in the international conference on ’Transforming TVET Systems for climate resilience and green jobs’ organized by Colombo Plan Staff College, Philippines together with the Ministry of Education, Higher Education and Vocational Education Sri Lanka on 24 th of March at Courtyard by Marriott Colombo, Sri Lanka.

The Conference serves as the flagship event of the five-day Regional Programme on “Transforming TVET for a Digital, Green, and Inclusive Economy” (23-27 March 2026), which continues throughout the week, bringing together representatives from CPSC member countries including Bhutan, Fiji, Malaysia, Maldives, Myanmar, Nepal, Philippines, Thailand, Pakistan, and Sri Lanka, fostering high-level dialogue and knowledge sharing on climate-resilient and green skills development.

The Conference features technical and plenary sessions on climate-responsive TVET systems, green skills development, national policy frameworks, and emerging technologies shaping industry transformation.

Addressing at the event, the Prime Minister emphasized the role of Technical and Vocational Education and Training (TVET) that equips individuals with practical, relevant, and future-oriented skills in addressing climate change and shaping a sustainable future.

The Prime Minister reaffirmed that this transformation remains a national priority for Sri Lanka. She stressed that education must go beyond knowledge dissemination to empower individuals with opportunities, dignity, and the capacity to contribute meaningfully to society.

She further emphasized the need to integrate environmental sustainability into education and training systems by embedding green skills in curricula, investing in modern training facilities, promoting innovation, and fostering collaboration between training institutions and emerging green industries.

Highlighting the importance of ensuring equity the Prime Minister further stated, that opportunities arising from the green transition must be accessible to all, including youth, young women, people with special needs, and marginalized communities.

Reaffirming Sri Lanka’s commitment to working closely with regional and international partnerships, the Prime Minister emphasized the importance of transforming them to actual benefits and partnerships.

The occasion was attended by the Secretary to the Ministry of Education, Higher Education and Vocational Education  Nalaka Kaluwewa, Additional Secretary (Vocational Training) Ms. Samanthi Senanayake Director General Colombo Plan Staff College Prof. Dr. Suresh K. Dhameja , TVET administrators, institutional leaders, policymakers, instructors, industry representatives, and international delegates from across the region and seniors officials and officials from Ministries.

(Prime Minister’s Media division)

Continue Reading

News

PM reviews progress of the committee appointed for the establishment of a National Nursing University

Published

9 hours ago

on

2026/03/26

By

A discussion to review the current progress of the special committee appointed under the government’s policy proposals to establish a National Nursing University aimed at elevating the nursing profession in Sri Lanka to degree level was held on 23rd of March at the Prime Minister’s Office under the patronage of Prime Minister Dr. Harini Amarasuriya.

During the meeting, the Prime Minister inquired into the progress made by the committee in relation to the establishment of the Nursing University and paid attention to the issues and views presented by the committee members.

Emphasizing that establishing a university is a long-term and complex process, the Prime Minister pointed out the importance of advancing this project in line with higher education standards, without hasty decisions, while also taking into account the existing conflicts and challenges within the university system.

The meeting was attended by the Vice Chairman of the University Grants Commission, Professor K. L. Wasantha Kumara, representatives of the All Ceylon Nurses’ Association, and officials from the Ministry of Health and Mass Media.

(Prime Minister’s Media Division)

Continue Reading

Latest News

Heat Index at ‘Caution level’ in the Western, Sabaragamuwa, Southern and North-western provinces and in Anuradhapura, Mannar, Vavuniya and Monaragala districts

Published

19 hours ago

on

2026/03/26

By

Warm Weather Advisory
Issued by the Natural Hazards Early Warning Centre of the Department of  Meteorology
at 3.30 p.m. on 25 March 2026, valid for 26 March 2026.

The Heat index, the temperature felt on human body is likely to increase up to ‘Caution level’ at some places in the Western, Sabaragamuwa, Southern and North-western provinces and in
Anuradhapura, Mannar, Vavuniya and Monaragala districts.

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.

Continue Reading

Trending