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

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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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Iranian ships stranded, Lanka fears US sanctions

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‘Companies may face US sanctions’: Lanka to put ‘national interest’ first as 19 Iranian vessels seek help

(ToI) Sri Lanka said on Friday it would “prioritise our national interests” before providing assistance to the crews of 19 Iranian ships anchored in international waters near the island nation.The crews are facing shortages of food, water and fuel. A foreign ministry spokesperson cited the risk of US sanctions against Sri Lankan companies supplying the vessels as a key concern.

The United States and Iran have been at war since February 28, when the US and Israel launched joint strikes against the Islamic Republic.

“Sri Lanka will put its national interest first before considering any help, and the companies that supply ships are aware of possible secondary sanctions from the United States,” spokesperson Thushara Rodrigo told reporters, ruling out any immediate assistance to the vessels.

Rodrigo clarified, however, that Sri Lanka had received no communication from the United States warning of repercussions if it decided to assist the vessels.According to Rodrigo, the ships are stationed 24 nautical miles off Sri Lanka’s coast.The Iranian Embassy said it had no information on the matter.

In March, a US torpedo attack sank the Iranian naval vessel IRIS Dena in Sri Lankan waters, killing 87 sailors.

The ship was returning to Iran after participating in a naval exercise at India’s invitation. A second Iranian vessel was brought to a Sri Lankan port after its crew reported technical problems.

Wounded sailors were treated at Sri Lankan hospitals, while those rescued from the second vessel were safely repatriated to Iran.

Sri Lanka is still recovering from an economic crisis, with both the United States and Iran serving as important trading partners. Washington played a key role in securing an International Monetary Fund bailout and supporting Sri Lanka’s agricultural sector to help avert a food crisis.

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Sri Lanka CERT warns of overseas university admission scams

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Sri Lanka CERT has warned the public of fraudulent social media advertisements offering admission to foreign universities after receiving complaints from parents and students who have lost hundreds of thousands of rupees to scammers.

The fraudsters reportedly pose as representatives of reputed foreign universities, promising admission, student visas, work permits and even eventual citizenship in return for registration fees and initial tuition payments.

They use convincing videos, photographs and documents circulated via email and WhatsApp to gain the confidence of unsuspecting victims before asking them to transfer money to foreign bank accounts. The scammers then disappear after receiving the payments, Sri Lanka CERT said.

The agency has urged prospective students and their parents to verify the authenticity of university representatives, documents and bank account details before making payments, and to seek overseas education opportunities only through legitimate and recognised channels.

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Navi Pillay’s Lankan affairs in focus as she wins 2026 Nobel Peace Prize

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Navi Pillay

Former UN High Commissioner for Human Rights and International Court of Justice judge Navanethem “Navi” Pillay has won the 2026 Nobel Peace Prize for her contribution to international law and efforts to promote peace, the Norwegian Nobel Committee announced in Oslo on Friday.

Announcing the award, committee chairman Jørgen Watne Frydnes said Pillay had “significantly enlarged the scope and impact of international law” and helped advance “a more comprehensive global legal order” with exceptional courage. He also praised her long career, which began as a lawyer confronting deep-rooted discrimination in South Africa, and described her as a person with a “firm moral compass”.

Pillay, 85, served as the UN High Commissioner for Human Rights from 2008 to 2014. Her tenure brought her into sharp focus in Sri Lanka, particularly over her assessment of the country’s human rights situation in the aftermath of the decades-long civil war.

During an official fact-finding visit to Sri Lanka from August 25 to 31, 2013, Pillay travelled to areas including Jaffna, Kilinochchi and Trincomalee, where she met civil war survivors, families of the disappeared and local communities.

Following the visit, she warned that Sri Lanka was moving towards authoritarianism and highlighted what she described as a persistent climate of fear.

She also reported intimidation and harassment of people who had sought to meet her during the mission.

Pillay urged the UN Human Rights Council to establish an international inquiry mechanism to investigate alleged war crimes and crimes against humanity committed by both government forces and the LTTE during the final stages of the 26-year civil war.

Her observations and recommendations became a significant part of international scrutiny of Sri Lanka’s post-war human rights record.

The Norwegian Nobel Committee received 287 nominations for this year’s Peace Prize, slightly more than a quarter of them being organisations. The committee traditionally considers efforts to promote peace, international fraternity and institutions that contribute to lasting stability.

Last year, Venezuelan opposition leader Maria Corina Machado won the prize for her campaign for a democratic transition in Venezuela. She was praised as a woman who kept the flame of democracy burning amid growing darkness.

The 2026 award marks the 125th anniversary of the Nobel Peace Prize, first presented in 1901. Over its history, the prize has recognised prominent figures and organisations involved in advancing peace, human rights and international cooperation.

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