Economy Forward

  The CB Governor at the Parliament's Finance Committee held last week alerted for near term default of domestic debt given its unsustainability unless the domestic debt optimization (DDO) is implemented as proposed without delay. The part of the video circulated in the media covering the alert is attached here.  https://www.youtube.com/watch?v=HzCSLcZqPI0 He further revealed that this position had been already informed to the Supreme Court through an affidavit filed by him. Therefore, this default alert is now a legally written event by a high ranking public official in the capacity of the chief of the independent central bank that manages the public debt, fiscal agent, fiscal adviser, monetary policy and financial sector regulation together. Further, it is the CB Governor who led the default of foreign debt on 12 April 2022.  Therefore, the alert should not be taken  lightly   although the government or the Treasury or the Finance Committee/Parliament has not ...

  The media these days is full of news of the government's plan to restructure its domestic debt through the restructure of Treasury bonds held by superannuation funds led by the EPF. The central bank (CB) presents that this is the only option available to the government to make its domestic debt sustainable in order to avoid a near-term default similar to the default of foreign debt on 12 April 2022. The CB also presents that this is the best option available to superannuation funds to protect their interests of the members.  The Parliament's Finance Committee also took up this subject for consideration last week and seems to have given the concurrence after assessing the loss outcomes of the DDO proposal based on information submitted by the CB. Therefore, this short article is intended to shed some light on the false information presented by the CB on this subject despite the fact that the CB has been managing the public debt for the past 73 years. Can superannuation funds ...

  This short article is to provide quick comments of economic sense on the CB's X  message on the recently awarded global ranking to the incumbent CB Governor. The X  message released by the CB to elaborate the significance and applicability of the captioned rating is presented below. As many know the true condition and affair behind this rating story, I only wish to provide quick comments on the criteria for the rating indicated by the CB in its  X  message. Ranking criteria as stated in the CB's X message Inflation has returned to desired mid-single digit levels in recent months from historic high levels recorded in 2022. Interest rates are being normalized. Volatility in the exchange rate has been curtailed. The economy is set to record positive growth from the latter part of 2023. I provide quick comments  below   to establish that all four items in the stated criteria are null and void and meaningless. 1. Inflation returned to mid-single digit lev...

  This article highlights the progress of standard monetary operations of the central bank (CB) during the first 8 months of 2023 based on a graphical presentations and their blunt failure. Meaning of monetary operations Monetary operations generally mean money printing operations carried out to ensure that money market interest rates are maintained within the targets of the monetary policy policy. This involves both injection and absorption of liquidity/money by the central bank to regulate the money market liquidity at levels consistent with respective interest rate targets (money market price targets). Inter-bank and government securities are the targeted markets of the monetary operations. Key interest rate target of Sri Lankan monetary policy is the inter-bank overnight interest rate to be kept within the policy interest rates corridor, i.e., standing deposit facility rate (SDFR) and standing lending facility rate (SLFR) used by the CB for its overnight credit operations with ...