Economy Forward

  (An AI-created image) The macroeconomic slogan played nowadays by all policymaking authorities in Sri Lanka is that the economy has now been stabilised from the bankruptcy/crisis confronted in 2022 and, therefore, the stage is set for sustainable growth momentum in future. This story is common for all countries who suffered the same economic crisis in 2022 akin to the global corona pandemic. Skyrocketing of inflation, exchange rate and balance of payment deficit, the difficulty in public debt service and grave shortage of essential commodities were the major crisis outcomes.  The stabilization story entails raising interest rates and taxes and cutting fiscal spending and deficits on the tune of the IMF bailout package. These are the standard stabilization policy actions faithfully pursued around the world whenever countries confront such difficult economic situations which are known as economic instabilities. Such policy actions known as monetary and fiscal policies are the ...

(A ChatGPT-created image)   Since the onset of the US war in Iran in early May, this year, almost all developing countries have commenced raising interest rates competitively by citing inflationary pressures as the single reason. However, all country authorities are well-aware of non-availability of any magical power of interest rates to control inflation.  It is not secret that they only raise interest rates to survive the modern poverty loop linked to foreign hot capital flows as nobody has alternative policy options to escape the loop despite the fact that it is the core structural economic problem confronted by these countries. The present poverty loop is its open economy version evolved from its closed economy version of low income-low savings-low investment-low productivity-low income, etc., also known as vicious cycle of poverty exhibited by old development economists. Development economics and old poverty loop Under the Bretton Woods agreement in 1944, the world moneta...

(A ChatGPT-created image) Public debt management in almost all countries suffers same non-curable headache. Its prime symptoms relate to debt stock, maturity profile, cost, liquidity and market behaviour prevailing beyond control of the public. However, politics of debt management can carry diverse stories and narratives. At the dawn of the year 2026, the new debt management office of the government (PDMO) of Sri Lanka took-over the  75 years old headache of public  debt management carried out by the Central Bank from its inception in 1950. The Central Bank being the monetary authority of the country had the ample legal and operational teeth to mange both debt and monetary system behind the debt easily. The Central Bank's job was quite convenient as the monetary system established in 1950 to be administered and regulated by the Central Bank was built on public debt which is the outcome of the fiscal operations whereas the Central Bank also enjoyed some fiscal powers and coord...

The  COPF's (Parliamentary  Committee on Public Finance) recent discussions and investigations on t he new Public Debt Management Office (PDMO)   reveal that both the COPF and the government have no knowledge on economic and financial fundamentals of the debt and the likely role of the PDMO. Therefore, the COPF seems to be criticizing the PDMO almost on daily basis for its incapacity to manage the mountain of debt inherited from the Central Bank at the end of 2025.  This debt stock which is claimed to be unsustainable is a cumulative result of the Central Bank managing the debt as part of its monetary policy since 1950. Therefore, the COPF has forgotten that the Central Bank defaulted debt in April 2022 resulting the then politics to decide to transfer of the mismanaged debt stock to the PDMO for better management despite its mismanaged legacy of risks and issues where the COPF expects the PDMO to do all wonders to make the debt stock sustainable. The COPF's investig...