Economy Forward

  Article's Background According to a news article published in the CNBC financial web (Read article here)  on 22 May 2024 , the Board of Indian central bank (Reserve Bank of India - RBI) has approved a whopping Rs. 2.11 trillion of profit transfer to the government for the financial year ended 31 March 2024. However, Sri Lankan central bank board has approved a profit transfer to the government for the year 2023 as a loss of Rs. 314 bn. as against the reported financial loss of Rs. 114 bn. Therefore, this short article is to compare the profit transfers of the two central banks and underlying issues. RBI profit transfer to govt. -  Key points in the article   The profit transfer of the RBI to the government for the year 2023/24 is Rs. 2.11 tn as compared to Rs. 874.16 bn for the last year. The government had budgeted Rs. 1.02 tn of dividend income from RBI and other state owned banks and financial institutions. Analysts had expected a RBI profit transfer in the range of Rs. 750 bn

  Article's Background I felt shamed when I saw the attached video ( Watch video here ) on the meeting of the COPF, Parliament, on 22 May 2024, held for examination of the proposed public debt management law for Sri Lanka. At the beginning of the meeting, it was stated that  Work on this law had been in progress since 2016 although it was delayed due to various reasons and  The work has now recommenced as a condition of the IMF programme due to the current debt unsustainability situation. I felt shamed due to two facts. First, the proposed new debt law is now presented after 8 years of delay only after the bankruptcy of the government. This work seriously started in early 2016 as the danger of debt management by the central bank (CB) since 1950 was foreseen at that time. Second, some of professionals who disrupted the work on reform initiatives on debt management inclusive of consolidated public debt law in 2016 attended the COPF as brand new professionals. The monetary policy team

Article's Background This article is based on views expressed by two globally leading business persons this week regarding operations of the  US central bank, Federal Reserve (Fed), which can be applied in general to central banking.   According to an article published in yahoo ! finance website on 17 May 2024, Elon Musk, the third richest businessman in the US, has compared the Fed's money printer to a game of monopoly (see article here)  (It was reported that the President of Sri Lanka also met him today in Indonesia). This view is based on generally limitless amount of money that the Fed can supply and, therefore, the Fed never goes bankrupt. He also has raised concerns over the US fiscal deficit which is expansionary in money.  According to an article published in Fortune website on 18 May 2024, Rick Rieder, Chief Investment Officer at Blackrock, has proposed (at a Bloomberg interview) that the Fed reverse the tight monetary policy course and cut interest rates now to tam

This article is to present the actual profitability of the central bank (CB) in 2022 and 2023 against the colossal losses published by the CB. Loss scenario - Business accounting standards The CB has reported a loss of Rs. 374 bn for 2022 and Rs. 114 bn for 2023 (see table below). This is based on adoption of evolving business accounting standards recommended for large commercial-based financial institutions. Therefore, the adoption of same standards for the CB is inappropriate for the CB is a financial regulatory institution operating on monopoly money printing license of the government. For instance, huge book-keeping/unrealised loss of Rs. 737 bn in 2022 and Rs. 597 bn in 2023 has resulted annual losses for 2022 and 2023. A detailed article was released in this blog yesterday ( Read the article here ) to explain the inappropriateness of business accounting standards for central banks  and questionable accounting used for the CB. Profit scenario - Central bank accounting standards Th

  Article's Background The central bank (CB) Governor at a special press meeting held on 7 May 2024 explained the technical background for central bank profit or loss. The relevant video clip circulated in the YouTube is attached here (Video play) . This article is intended to highlight the inaccuracy of explanations given by the Governor relating to CB's loss for the year 2023. Accordingly, it appears that he has no idea of financial reporting relevant to central bank monetary operations and policies. This article proves that the CB loss stated above is a result of improper monetary policy operations and inappropriate accounting adopted for measurement and reporting of CB monetary operations. Governor's explanations Central bank (CB) may make profit or loss when implementing its policies. CB reported a loss of Rs 19 bn in 2015, Rs. 374 bn in 2022 and Rs. 114 bn in 2023. He cited two factors attributable to the loss in 2023. The revaluation cost due to the increase in the e