Economy Forward

  The CB Governor claims that the Central Bank has significantly tightened the monetary policy to control the rising inflationary pressures and to maintain the price stability in the medium to long-term. The monetary policy tightening has been the trend followed by almost all central banks in the world for same reason since the end last quarter of 2021 at different phases. Therefore, the objective of this article is to prove why the CB Governor is incapable of controlling the present level of inflation and maintaining the price stability in the crisis-hit economy of Sri Lanka. This 1 st part of the article presents the Governor’s views on present soaring inflation, description of inflationary sources in general, specific causes of high inflation in Sri Lanka and the Central Bank's monetary policy actions taken so far to tame the inflation. Accordingly, the next part of the article will present why the Governor will definitely fail in controlling the inflation and maintaining...

T he Central Bank yesterday (12 th August) announced a new element to its policymaking framework by employing a Stakeholder Engagement Committee (SEC) of 18 persons considered as key stakeholders of the economy. The TOR of the SEC has been stated as follows. This article is released to question the public accountability of the SEC based on several governance issues including the SEC being the successor to the two consultative committees on monetary policy and financial system stability which are the core duties and responsibilities of the CBSL under the Monetary Law Act (MLA) and several other statutes. The TOR of the SEC The CBSL press release states as follows. “The primary role of this high-level consultative Committee is to represent the views and sentiments of the private sector and academia on economic conditions and the outlook, considering the overall economic development, particularly in the monetary and financial sectors of the economy . Further, the SEC is expected...

  T he objective of this article is to present a practical insight into the usefulness of the MMT as a macroeconomic policy approach to drive fiscal and monetary policies for the economic development and upliftment of living standards in countries without any differentiation between developed countries and developing countries. Accordingly, monetarists’ criticism on the MMT as always being inflationary money printing is disputed as baseless. Therefore, it is the duty of the policymakers to choose between the MMT and other policy models as there is no single economic model universally tested and accepted. Commencement of the MMT Dialogue Fighting with the global Corona pandemic required the governments world over to spend huge sums of money to protect households and businesses from the humanitarian crisis associated with the pandemic. As governments generally fund their spending through borrowing from the credit/financial markets including printing of money, central banks also...

T hese days, everybody waits for an all-party government to be formed and a magical recovery of the economy and general public from the catastrophic economic crisis by same group of political leaders under whom the crisis developed to this stage. While there is a strong hope for some economic recovery facilitated by the power stability in an all party government, a sustainable recovery will depend on the extent to which the new government implements a new macroeconomic governance system capable of resolving acute economic problems such as rising poverty and economic inequality confronted by the public in a fairly short period so that the living standards can be improved to forestall the next wave of social protestors, agitators and leftist ideologists because poverty and inequality are the founding pillars for such social activists. However, it appears that the government is trying to follow the already failed number-based macroeconomic management system led by the monetary and fis...