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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.
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India’s External Affairs Minister meets Sri Lanka PM
India’s External Affairs Minister, Dr. Subramaniam Jaishankar, met with the Prime Minister of Sri Lanka, Dr. Harini Amarasuriya, on 23 December at Temple Trees, during his visit to Sri Lanka as the Special Envoy of Indian Prime Minister Shri Narendra Modi.
The meeting took place as part of the official visit aimed at holding discussions with Sri Lanka’s top leadership, at a time when the nation commenced reconstruction efforts following the devastation caused by Cyclone Ditwah.
During the discussions, the Minister of External Affairs of India reaffirmed readiness to extend support for Sri Lanka, including assistance in rebuilding railways, bridges, and strengthening of the agricultural sector in the country. He also highlighted the importance of having effective systems in place to respond to disaster situations, supported by strong legislative, administrative, and institutional frameworks. Both sides reviewed ongoing relief efforts and explored avenues to further strengthen bilateral cooperation in disaster response and recovery.
The Prime Minister commended the Government of India for the continued support, noting that the recovery process following the devastation caused by Cyclone Ditwah include beyond immediate relief efforts to long-term measures such as resettlement, and reconstruction of habilitation and infrastructure.
The Prime Minister further stated that steps have been taken to reopen schools as part of the process of restoring normalcy, with close monitoring in place. The Prime Minister emphasized the need to ensure stability, reduce vulnerability, and strengthen protection mechanisms highlighting the solidarity of the people, their strong spirit of volunteerism, and collective action demonstrated during the emergency situation.
The event was attended by the High Commissioner of India Santosh Jha, Additional Secretary (IOR), MEA Puneet Agrawal, Joint Secretary (EAMO), MEA Sandeep Kumar Bayyapu, Deputy High Commissioner Dr. Satyanjal Pandey, and representing Sri Lankan delegation, Secretary to the Prime Minister Pradeep Saputhanthri, Additional Secretary to the Prime minister Ms.Sagarika Bogahawatta, Director General (South Asia), Ministry of Foreign Affairs Samantha Pathirana, Deputy Director, South Asia Division, Ministry of Foreign Affairs Ms.Diana Perera.
[Prime minister’s media division]
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Sri Lanka’s coastline faces unfolding catastrophe: Expert
Sri Lanka is standing on the edge of a coastal catastrophe, with the nation’s lifeline rapidly eroding under the combined assault of climate change, reckless development and weak compliance, Director General of the Department of Coast Conservation and Coastal Resource Management (DCC&CRM) Dr. Terney Pradeep Kumara has warned.
“This is no longer an environmental warning we can afford to ignore. The crisis is already unfolding before our eyes,” Dr. Kumara told The Island, cautioning that the degradation of Sri Lanka’s 1,620-kilometre coastline has reached a point where delayed action could trigger irreversible damage to ecosystems, livelihoods and national security.
He said accelerating coastal erosion, rising sea levels, saltwater intrusion and the collapse of natural barriers, such as coral reefs and mangroves, are placing entire coastal communities at risk. “When mangroves disappear and reefs are destroyed, villages lose their first line of defence. What follows are floods, loss of homes, declining fisheries and forced displacement,” he said.
Dr. Kumara stressed that the coastline is not merely a development frontier but the backbone of Sri Lanka’s economy and cultural identity. “More than half of our tourism assets, fisheries and key infrastructure are concentrated along the coast.
If the coast fails, the economy will feel the shock immediately,” he warned.
Condemning unregulated construction, illegal sand mining and environmentally blind infrastructure projects, he said short-term economic interests are pushing the coastline towards collapse. “We cannot keep fixing one eroding beach while creating three new erosion sites elsewhere. That is not management—it is destruction,” he said, calling for science-driven, ecosystem-based solutions instead of politically convenient quick fixes.
The Director General said the Department is intensifying enforcement and shifting towards integrated coastal zone management, but warned that laws alone will not save the coast. “This is a shared responsibility. Policymakers, developers, local authorities and the public must understand that every illegal structure, every destroyed mangrove, weakens the island’s natural shield,” he added.
With climate change intensifying storms and sea surges, Dr. Kumara warned that Sri Lanka’s vulnerability will only worsen without urgent, coordinated national action. “The sea has shaped this nation’s history and protected it for centuries. If we fail to protect the coast today, we will be remembered as the generation that allowed the island itself to be slowly eaten away,” he went on to say.
By Ifham Nizam
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SOC examines proposed amendments to the Microfinance and Credit Regulatory Authority Bill
The Sectoral Oversight Committee (SoC)on Economic Development and International Relations recently examined the Microfinance and Credit Regulatory Authority Bill and the proposed amendments thereto.
The SoC met in Parliament under the chairmanship of Member of Parliament Ms. Lakmali Hemachandra, (Attorney at Law). A group of officials representing the Central Bank of Sri Lanka, the Department of Development Finance of the Ministry of Finance, Planning and Economic Development, and the Legal Draftsman’s Department participated in the meeting.
The Microfinance and Credit Regulatory Authority Bill was presented to Parliament for its First Reading on 26.11.2025. Accordingly, the Committee held an extensive discussion on the amendments that have been proposed to the Bill. The Chair of the Committee, Hon. Member of Parliament Ms. Lakmali Hemachandra, (Attorney at Law) stated that it is important to give careful and further consideration to this Bill and that discussions on the proposed amendments will be held again on a future date.
Members of Parliament Lakshman Nipuna Arachchi, Thilina Samarakoon, Nilanthi Kottahachchi, Attorney at Law, Sagarika Athauda, Attorney at Law, Suranga Ratnayaka, and Wijesiri Basnayake also participated in this Committee meeting.
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