Tuesday, June 25, 2024

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Govt. continues money printing despite pledges to curtail it.

Sri Lanka is planning to strengthen public finances and reduce money printing to stabilize the economy, Treasury Secretary Mahinda Siriwardene said ahead of discussions with the International Monetary Fund.

Secretary Siriwardene said a circular to cut current spending will be issued immediately.

However In April, 125 billion rupees was printed taking the Central Bank’s outright Treasury bill stock to 1,853 billion rupees, from 1727 billion rupees at the end of March.

The government has paid Rs 123 billion not only the salaries but also the festival advance (of state workers) to protect the country, Finance Ministry sources revealed.

The present administration has stepped up money printing at a time of civil unrest demanding essential commodities, fuel and cooking gas at a reasonable price amidst economic crisis triggered by dollar scarcity, massive external debt and balance of payment issues, with the Central Bank (CB) printing a sum of Rs. 20.28 billion on April 18 and 19.

It printed Rs 1.22 billion on April 18 and Rs.19.06 billion on April 19, the day a protestor was shot dead and 24 others injured when police opened fire to disperse angry crowds in Rambukkana who demanded fuel for reduced prices following a massive hike in petrol and diesel on the previous night.

Several protests have been witnessed this week in Kandy, Galle, Gampola, Mathugama, Baddegama, Avissawella, Kegalle, Hingurakgoda, and Madampe and buses were unable to proceed on their journeys on the Chilaw-Colombo main road as protestors thronged the road.

The CB has printed Rs.1.79 trillion during the period of January 2020 to April 19, 2022, official data showed. CB Governor Dr. Nandalal Weerasighe told a recent media briefing that the bank will curtail money printing while refusing to divulge details of money printed in 2021 and 2022 stating that anyone can find it from the CB web site.

However a sum of Rs 19.06 billion was printed two weeks after his assumption of office, and while he was away attending IMF meetings in Washington.

The CB had printed a massive sum of Rs. 130 billion in October 2021 alone. According to the available data, from December 2019 to October 2021, the CB has printed Rs. 2.8 trillion.

Sri Lanka printed nearly money amounted to Rs 1.4 trillion in year 2021.Earlier this week, former Governor Ajith Nivard Cabraal admitted that certain issues can arise owing to printing money and the CBSL is reducing the amount of money being printed at present.He said that the practice of printing money is not a new phenomenon.

Sri Lanka’s inflation increased to 18.8 per cent in March 2022 from 15.1 per cent in February as the Central Bank printed money to keep interest rates low and the depreciation of currency rupee float, Census and Statistics Department data shows.

Colombo University Professor in Economics Sirimal Abeyratne said that there was a limit for the money printing especially during a recession, as aggregate demand, consumer demand, business demand and international trade gets disruptive.

He noted that Sri Lanka is facing commodity shortage and inflationary pressure, so it is opportune to contain the money printing otherwise “we will end up aggravating our inflationary pressure”.

“Sri Lanka will have to increase investments and exports taking prudent policy decisions at this critical moment but resorting to money printing will definitely affect the economy,” he warned.

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