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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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Customs asked to resume probe or face legal action

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Nagananda / Liyanagama

Rs. 16 bn BMW revenue fraud:

Public interest litigation activist Nagananda Kodituwakku has said he will initiate appropriate proceedings against Director General of Customs, Wimal S.K. Liyanagama, in terms of the Anti-Corruption Act No 9 of 2023, unless the Customs carries out a revenue fraud inquiry to recover approximately Rs 16 bn in lost government revenue.

General Secretary of Vinivida Foundation, and former Customs officer, Kodituwakku said that though the Department, in response to his request for a meeting to discuss the issue, in writing, assured them that the investigation was underway, they found that the actual situation was not so.

Kodituwakku alleged that the Customs Chief had neglected what he called statutory duties under the Customs Ordinance, by disregarding his request for a meeting.

Kodituwakku said the investigation into the importation of 1,728 brand new BMW vehicles, under the concessionary duty permits issued by the government for the public servants, between 2011 and 2014, had been stalled.

The civil society activist said that investigations had revealed the vehicles hadn’t been imported by the permit holders themselves but others. It also transpired that the value of the imported vehicles, mentioned in the commercial invoices, proforma invoices and the CusDecs, tendered to Customs in the names of the permit holders, were not the actual values for the vehicles in question.

The high-profile case has been handled by the Central Investigation Directorate, at that time headed by Murugesu Thayabaran, a batchmate of Kodituwakku.

The ex-Customs officer said that he had appeared as counsel for Thayabaran in Court of Appeal and was determined to bring the case to a successful conclusion. According to him, the importer, over the years, had been represented by nine President’s Counsel as the case dragged on from the time of P.S.M. Charles, Director General, Customs.

Kodituwakku made available letters he wrote to the Customs and other parties on this issue, to The Island. Pointing out that the Court of Appeal on 7 May, 2024, dismissed the importer’s final appeal regarding the case pertaining to the revenue loss of Rs. 16 bn, Kodituwakku said that although the court had cleared the way for the Customs probe, no action had been taken.

However, the Court of Appeal ruling was given before Liyanagama succeeded Seevali Arukgoda as DG Customs on 6 May, 2026. Liyanagama served as Director General of the Department of Management Services at the Treasury before the new appointment.

Kodituwakku said that he had also brought the Customs case to the attention of the Commission to Investigate Bribery or Corruption (CIABOC).

Emphasising the failure on the part of the Opposition to raise this issue, both in and outside Parliament, Kodituwakku said that since the exposure of the BMW scam, during Mahinda Rajapaksa’s presidency, there had been four presidents, namely Maithripala Sirisena, Gotabaya Rajapaksa, Ranil Wickremesinghe and incumbent Anura Kumara Dissanayake. Unfortunately, successive administrations had allowed the interested parties to drag the case. The lack of interest shown by political parties revealed that they not only protected those responsible but encouraged corrupt practices of allowing third parties to import vehicles in terms of permits issued to legitimate recipients of such permits.

Having campaigned on an anti-corruption platform, during the presidential and parliamentary polls in 2024, the NPP couldn’t, under any circumstances, turn a blind eye to this situation, Kodituwakku said, adding that even the IMF should be concerned of the failure on the part of successive governments to recover the money.

By Shamindra Ferdinando

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Outgoing Chinese Ambassador Qi Zhenhong bids farewell to Mahanayake Theras

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The outgoing Ambassador visiting the Maha Nayake Theras

Outgoing Chinese Ambassador to Sri Lanka, Qi Zhenhong, who is scheduled to conclude his tenure on July 31, visited Kandy on the afternoon of July 18 to pay respects and receive blessings from the Mahanayake Theras of the Malwathu and Asgiriya Chapters.

During the visit, the Most Venerable Thibbotuwawe Sri Sumangala Mahanayake Thera of the Malwathu Chapter and the Most Venerable Warakagoda Sri Gnanarathana Mahanayake Thera of the Asgiriya Chapter hailed the Ambassador’s dedicated service to the country.

The Malwathu Mahanayake Thera noted that Ambassador Qi had performed his duties as a diplomat to the highest possible standard. He stated that the Ambassador’s contributions during his nearly six year tenure, including assistance during natural disasters and support for economic, educational, cultural, and religious sectors, would never be forgotten.

Expressing his appreciation, the Mahanayake Thera remarked that he would like the Ambassador to remain in Sri Lanka even after retirement.

The Asgiriya Mahanayake Thera, Most Venerable Warakagoda Sri Gnanarathana Thera, also commended the Ambassador’s efforts in supporting infrastructure development during various natural disasters and praised his initiatives in strengthening the bilateral relations between China and Sri Lanka.

Reflecting on his tenure, Ambassador Qi Zhenhong stated that the Sri Lankan economy is gradually improving under the new government. He noted that the Chinese government fully supports the current government’s focus on industrial policy, state owned enterprise reform, and exports.

The Ambassador highlighted several ongoing collaborative projects, including an agreement to provide school uniforms, the reconstruction of 14 bridges destroyed by cyclones, and the upcoming arrival of the first batch of electric buses and vehicles.

“Sri Lanka feels like my second home,” the Ambassador said, adding that he is grateful for the generous support and sincere friendship extended to him by the people of Sri Lanka. He confirmed that while his tenure ends on July 31, he will continue to engage with Sri Lanka whenever possible.

The Ambassador also visited the Senior Member of the Asgiriya Chapter, Most Venerable Godagama Sri Mangala Thera, to receive further blessings, with other prominent members of the Maha Sangha also in attendance.

By S.K. Samaranayake

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Move to extend retirement age of top judges: BASL asks govt. to stop process pending meaningful consultations

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(From left: Rienzie Arsecularatne, Rajieev Amarasuriya and Pasindu Silva

President of the Bar Association Rajeev Amarasuriya yesterday (21) briefed the media regarding the action taken by them to discourage the NPP government from increasing the retirement age of superior court judges.

Amarasuriya, flanked by BASL Deputy President Rienzie Arsecularatne (right) and Treasurer Pasindu Silva reiterated their strong opposition to the alleged move. The briefing took place at Dr. H.W. Jayawardene QC Auditorium, BASL Secretariat, Mihindu Mawatha.

Pointing out that the move to bring in a constitutional amendment to facilitate the project would be detrimental to the judiciary and the country, the BASL requested an opportunity to meet Justice Minister Harshana Nanayakkara to discuss the issues at hand.

The BASL proposed that the delegation would consist of members of the Executive Committee, President’s Counsel and senior members of the legal fraternity.

Amarasuriya said that the BASL was willing to assist the Justice and National Integration Ministry in a consultative process in case the government decided to do so. “We sincerely hope that no further steps will be taken in relation to this proposal until meaningful consultation has taken place with the principal stakeholders of the justice sector,” Amarasuriya said.

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