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2025 & Beyond - A contracted, deflationary economy with failed monetary policy. Clean Sri Lanka to rescue the economy or nobody's accountability?

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  Article's Purpose The purpose of this article is to highlight grave concerns over the monetary policy that has miserably failed to maintain the price stability in the year 2024 as set out in the statute and its likely contagion over the year 2025 and beyond. What is the price stability mandate? It is the maintenance of percentage increase of the quarterly average consumer price index within 3%-7% with a hypothetical middle target of 5% as set out in the monetary policy framework agreement reached between the Minister of Finance and Central Bank (CB) inconsistent with the current macroeconomic fundamentals of the economy. Why price stability has failed? The economy has confronted a four-month long deflationary trap with nine months violating the mandatory 3%-7% inflation target. The CB also predicts deflationary trend to be continued in 2025 and 2026 too. The manner in which inflation fast accelerated in 2022 and decelerated in return-post in 2023 and 2024 is self-explanatory for ...
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Restructuring of defaulted ISBs. A new debt trap on risky hedging deals? Who is responsible for national risks?

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Article's Purpose and Background The purpose of this article is to raise public concerns over  the design of Eurobonds issued in derivative/hedging form in exchange for defaulted International Sovereign Bonds (ISBs) in contrast to the standard government practice of plain vanilla debt instruments,  their legality and  the authorities responsible for possible financial and economic losses including new default events possible in the future, given the complex derivative nature of Eurobonds. The article shows that the so-called ISBs restructuring after wasting 32 months in default on 12 April 2022 is nothing but the extension of repayment time from 2022-2030 to 2030-2038 with greater financial risks due to the exchange of hedging contracts for defaulted ISBs with foreign investors where financial benefits and national wonders promised by the authorities from time to time are great lies. The short background of the article is as follows. 1. The Ministry of Finance (MOF) press...
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New govt. to follow Trump-Musk model of Capitalism? A surer path to prosperity?

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  Background of the article The new government that has been labelled as the conventional leftist has chosen the IMF-Dollar debt based restructuring of the economy. This is intended to enter the dollar-based international capitalism as the country's new growth model.  Last two days, the govt. announced two new policies of seeking government efficiency, primarily through restructuring of 166 non-commercial state institutions, and Clean Sri Lanka through the state and private sectors.  The govt efficiency policy is clear from the Cabinet meeting held 19th  (Download the short video here)  and the President's speech on the status of public service yesterday  (Download the short video here) . Meanwhile, the whole US November 2024 Presidential election campaign of Donald Trump with the support of Elon Musk primarily promised two policies, i.e., to boost the Dollar to be the global reserve currency again and setting up a department of government efficiency t...
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Why IMF approach is a misbelief? Stabilization unreachable?

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  Article's background I happened to read a meaningful opinion published in the Ethiopian paper "Capitol" regarding the IMF programme for Ethiopia. (Read the article here) .The article is reproduced below for easy reference. The design of IMF programes for all countries hit by foreign currency crises is almost same except the popular economic numbers of respective countries. The reason for the same design is the IMF's peculiar approach to the macroeconomic management of countries as highlighted below. The IMF believes that all economic ills under the sun and moon are because of the excessive budget deficit and debt. Accordingly, inflation, high interest rates, BOP deficit, currency depreciation, low growth and business investment and debt unsustainability are all direct results of the continuing budget deficit. Therefore, the IMF stabilization program has five essential elements. A medium-term loan to boost the foreign currency reserve for the time being.  Conditions ...
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OMO Money Printing - A failed reality show with loss to public? Nobody to correct it?

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  Article's purpose This articles highlights the falsehood of clarifications given by the central bank (CB) on public concerns raised over its OMO (Open Market Operations) money printing operations. Such clarifications are covered in a speech of the CB Governor (see the video here) , the media interview of the OMO Head  (see the interview)  and a press release on 29th October (Read press release here) . However, new concerns are raised with the request to discontinue this kind of infusion of excess OMO liquidity. CB's clarifications Followings are the key points made by the Governor. The CB did not print money to fund the government as the new law prohibits direct lending to the government. OMO/monetary policy operations are similar to those of all central banks in the world. The CB estimates liquidity of the banking sector daily, weekly and monthly and carries on OMO accordingly to provide liquidity arising from bank lending operations. OMO are used for keep the cal...
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