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Modern monetary theory (MMT). A factful economic guide to develop the economy and living standards through sovereign currency.

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  Article's purpose and background The purpose of this article is to summarize the modern monetary theory (MMT) in relation to how modern monetary systems operate on sovereign/state currencies. However, the  MMT is not a monetary theory built upon unrealistic assumptions like in the old or mainstream monetary theory. Instead, the MMT provides a lens to understand how monetary operations of a sovereign currency monetary systems take place and their macro impact on the economy. However, the mainstream monetary theory which is presented in text books and used for macroeconomic management is built on totally different assumptions. Therefore, the MMT and  the mainstream   monetary theory are conflicting each other on the source of modern money/currency, its macroeconomic impact and macroeconomic recommendations.  Highlights of the mainstream monetary theory Its major assumptions and policy recommendations are highlighted below. Sovereign currency of a country is...
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Why was a central bank established in Sri Lanka in 1950? Could the government achieve its national objectives?

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Article's purpose and background The present central bank which was established on 14 September 2023 as a part of economic management package set out in the 2023 IMF Accord has recently released a press notice to inform the public of the closure of its Public Debt Department (PDD) effective from January 01, 2026  (Read the notice here) . The PDD is one of few Departments established under the Monetary Law Act (MLA) at the inception of the central bank on 28 August 1950. This news motivated me to write this short article in the national interest on the following background. The PDD served as the bread and butter for the implementation of the fiscal policy of the government and monetary policy of the central bank as set out in the MLA in the national interest during the past 76 years, given the fact that the Sri Lankan monetary system that was established by the MLA in 1950 was built on sovereign currency (Sri Lankan Rupee) supplied by the government through its fiscal spending and d...
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Trump's new 30% tariff against Sri Lanka. 2nd Sri Lankan default? Who will rescue now?

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  Article's purpose This short article highlights the failure of the Sri Lankan government to agree on a comprehensive trade deal with the US to benefit from the US economy and the new world trade order being laid by the US under its new trade and economic policy ( Read the policy article here) .  The short background of the article is as follows. The US President Donald Trump through his letter dated 9 July 2025 addressed to the Sri Lankan President has communicated the final reciprocal tariff rate of 30% on imports from Sri Lanka. This is a downward revision on the 44% reciprocal tariff imposed on Sri Lanka on 2 April 2025 to be effective from 9 April 2025 which was later suspended for 90 days. The formular for the initial 44% tariff was the half of the percentage of the US trade deficit with Sri Lanka in the total value of the US imports from Sri Lanka in the year 2024. Sri Lanka is one country out of almost all countries in the world who confronted such reciprocal tar...
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