Economy Forward

The objective of this article is to highlight the pathetic condition of the survey and research skill at the present Central Bank of Sri Lanka (CBSL) based on publication of financial literacy survey 2021 released on 25th October  (https://www.cbsl.gov.lk/sites/default/files/cbslweb_documents/financial_literacy_servey_sri_lanka_2021_e.pdf) The CBSL possess huge institutional memory and skills in the conduct of island wide household surveys and release of publications immensely useful for the policymakers, researchers and the general public. The series of Consumer Finances Surveys since 1953 has been the landmark source of data in assessing the socio-economic progress of the post-independent Sri Lanka. The Statistics Department in the CBSL has emerged to carry out a specialized function of surveys and compilation of socio-economic statistics within the CBSL whereas the Economic Research Department has been focusing on policy-focused research. Having been engaged in several surve...

Everybody knows that Sri Lankan Central Bank (CBSL) is non-active in its almost all national economic policy powers authorized in the Monetary Law Act (MLA) except money printing. Therefore, it is reasonable to state that the CBSL is an operationally bankrupt central bank in the world. One leading economist connected to the CBSL commented in 2015 that the CBSL was a bankrupt institution similar to Sri Lankan Airline due to the erosion or negative capital position. However, this kind of capital-based description of bankruptcy as in the case of commercial businesses does not apply to central banks as they can print money and make profit. Therefore, the purpose of this article is to shed some light on how the operationally bankrupt CBSL’s money printing policy is gradually murdering the Sri Lankan economy and its people who have been in the economic ICU from the middle of 2021.  The article primarily highlights systemic risks of the economy arising from the present monetary poli...

These days, interest rates are rising globally at a faster phase. The main reasons are inflation expectations connected with rising inflation, interest rate hikes by central banks and rising risks of economic and business activities. The fine example is the present market turmoil in the UK from September 26 immediately after announcing the Govt. mini budget  on September 23  with a historic tax cut of £45 bn and a cap on annual household energy bill at £2,500 reduced from  £6,500 for  the aim of promoting growth and controlling inflation. As immediate financial market response, the currency tumbled to historic low and govt. bond yields shot up in speculation of rising debt to finance the mini budget deficit and resulting inflation. Meanwhile, the pension fund industry being a major investor in bonds started confronting a bankruptcy-threatened liquidity risk due to plummeted bond prices.  As a result, the Bank of England (BoE) had to announce £65 bn worth bond ...

  During past few months, central banks around the world have raised policy interest rates by about 5-10 times the rates that prevailed at the end of 2021. This is the fastest monetary policy tightening phase recorded in the world to control inflationary pressures. However, inflation has been rising non-stop while central banks tell various stories about rising inflation, tight financing conditions and their ability to control inflation back to targets (2% in developed countries from 6%-10% at present) in the medium-term to maintain the price stability in the medium to long-term. Meantime, governments take various measures to ease the cost of living though fiscal measures such as energy subsidies and cost of living support to low income households. The good example is the UK’ growth targeted mini budget presented on 23 rd September with a package of historic tax cuts and a cap on household energy bills. However, central bank talks are full of highly conceptual statements wit...