Economy Forward

The purpose of this article is to shed some light on risks of a global economic pandemic caused by central banks with the misconception of their ability to control inflation in the old monetary model (Quantity Theory) applicable to tribal economies. The world is confronting four decades high inflation with large supply side bottlenecks consequent to two major sources or external shocks, i.e., global Corona pandemic and Ukraine-Russia warfare whereas policy solutions initiated in the old fashioned models are seen ineffective and driving the global economy towards a pandemic ahead. How the Corona pandemic caused inflationary pressures and supply bottlenecks The Corona pandemic in 2020 and 2021 shattered the global economy as economists were not aware of macroeconomic management models in the presence of such health pandemics. The lockdowns and social distancing policies followed to fight the spread of the pandemic has caused lasting impacts on the global economy through the disrupt

  The UK’s new fiscal policy launched in last week through the mini budget of the new government has shaken up the global community of monetary pandiths and central banks. The reason is the landmark cuts in tax rates and the cap on energy bills of households (or energy price guarantee). The new fiscal policy is known as growth plan for the UK economy. The new Chancellor in his first day of the office sacked the Treasury Secretary, who was credited for tight control of spending, by claiming for the focus on growth not fiscal discipline.   Accordingly, new fiscal responsibility is to return to GDP growth of 2.5% and control of the soaring cost of living. All Ministries have been requested to be growth units in respective areas. The UK is the global origin of the growth-focused fiscal policy school emerged on the philosophy of John Maynard Keynes, a renowned British Economist (1883-1946). Therefore, the present UK fiscal policy is no doubt driven by same school. Therefore, the obj

  The IMF press release on the staff agreement for the IMF 48-month Extended Fund Facility (ETF) of US$ 2.9 billion was released on September 01, 2022, whereas same was reproduced in the CBSL press release issued on same day. The IMF press release on the staff agreement for the previous ETF of US$1.5 billion for 36-months was issued on April 18, 2016, where the CBSL did not reproduced it. I went though both press releases and found the IMF Glossary being almost same in intent of both press releases, except for few additions such as restoring macroeconomic stability and debt sustainability, reducing corruption, condition of receiving financing assurance (or debt relief) from Sri Lanka’s external creditors and IMF management approval stated in the present press release. In addition, the difference in the purposes or aims of the two IMF programmes is noteworthy as the present programme is intended to support Sri Lanka's economic policies whereas 2016 programme has been to suppo

  Although there is a lot of post-mortem analyses of the present economic crisis and resulting bankruptcy of the economy, there is no controversy over the triggers of the crisis primarily being the deteriorating foreign currency position of the economy, despite the statutory responsibilities of the Monetary Board (MB) and the Central Bank (CBSL) since its inception and the vast economic data base and operational mechanism available with them to detect early warnings and manage macroeconomic risks. Further, the MB is still on the sleepy mode until the crisis is resolved in old fashion with an IMF bailout supported by the default and restructuring of government foreign debt, irrespective of the cost to the general public. Therefore, the purpose of this short article is to present the set of key monetary related data that the MB/CBSL could use to detect and derail the path of the economy’s bankruptcy so far and further ahead. Economy’s Operating Structure We all know activities