Economy Forward

  Article's Background The central bank of Zimbabwe launched a new currency, Zimbabwe Gold, on 5 April 2024 and demonetized the existing currency,  Zimbabwean Dollar. This is its sixth attempt to stabilize the country's currency and thereby the economy that have fallen from crisis to crisis for the past 25 years where the economy fell to poverty from the rich agriculture and mining in 2000s. However, the local currency system has collapsed where several foreign currencies formally operate as the legal tender and other functions of money. All circumstances underlying the collapse of the economy are connected with lapses in country governance system although there is a central bank like in other countries. Therefore, the purpose of the short article is to highlight the importance of the country governance system for the preservation of the trust in and stability of the national currency and its value to drive economic activities and living standards. Ethnic conflict and authorit...

  I thought of writing this article no sooner I saw a social media video clip attached here (CB at COPF).  It is a part of the CB Governor pleading the permission of the Chairman of the COPF to pay salaries to staff for the month of March at rates agitated by both Parliament and general public. This shows how the CB Governor attempts to clicking on to politics to save his public seat in contravention of central bank governance standards. Article's Background In my book "Innovating Central Banks" released in March 2018, the Part II was allocated for "Central Bank Governance: Public Trust and Survival." Under the Part II, Chapter 6 presented "Issues in Central Bank Governance" from selected countries. This included extraordinary acts of Governors of Reserve Bank of India (RBI) and Bank Negara Malaysia (BNM) to protect the independence by stepping down from respective public seats. Both emanated from the policy conflict between the central bank and govern...

  Articles' background I happened to read an article published in the GhanaWeb on 20 March 2024 on views expressed by IMF Managing Director Ms Kristalina Georgieva at her visit to Ghana as part of IMF surveillance on its loan programme (read the article here) . Ghana confronted an economic crisis similar to Sri Lankan crisis (debt, foreign currency, high inflation and contraction) and secured a 36-month IMF loan programme of US$ 3 bn in May 2023 with similar conditions imposed in Sri Lankan programme.  Ghana has so far received US$ 1.2 bn as first two tranches and the 2nd review is expected in April 2024. However, the core of the programme, debt restructuring, is still in the deadlock without any confirmation of the prospective date and the quantum of restructuring agreement with official and private creditors. Therefore, this article is a short presentation of the questionability of IMF programmes in the present status of Ghana and other crisis-hit countries. Views of IMF Man...

  The Bank of Japan (BOJ), the Japanese central bank, today (19 March 2024) announced a landmark change in its monetary policy by raising the policy interest rates first time in 17 years along with several tool amendments to its monetary policy.  Therefore, the purpose of this article is to express my views that the BOJ decision today is another point in its monetary policy blunder that has existed miserably in the past 30 years to get the economy out from deflation trap. BOJ monetary policy focus - Inflation control In line with the old tradition of central banks, the BOJ also follows monetary policy to drive inflation towards a target in the medium to long term. For the past two decades, its inflation target has been 2% parallel to other developed countries. However, Japan has been confronting a deflation trap during the past 2-3 decades. Therefore, unlike in other countries, the BOJ has been pursuing the monetary policy to boost inflation. Inflation in Japan For this purpos...

  IMF bailout programme for Sri Lanka We all know that Sri Lankan Parliament has approved the IMF financial programme 2023-2026 as the only option available to rescue the country from its economic crisis.  As per programme information, it rests on six pillars listed below. Advancing Revenue-Based Fiscal Consolidation, Reforms to Social Safety Nets, Fiscal Institutions, and State-Owned Enterprises Restoring Public Debt Sustainability Restoring Price Stability and Rebuilding External Buffers Ensuring Financial Stability Reducing Corruption Vulnerabilities Raising Potential Growth All these pillars are required to be constructed and fortified by a large number of policy actions. Whether such policy actions will guarantee the resolution of the economic crisis is a separate subject to be studied at the progress review of the programme implementation. Key direct stakeholders of the IMF programme are the Ministry of Finance, Central Bank, Cabinet and Parliament. The...

Article's background Sri Lankan economic crisis is primarily a result of bankruptcy of the government on default of foreign debt and central bank of foreign currency reserve. Both debt and foreign reserve were managed by professional economists of the central bank for the past since 1950. I saw a Parliamentary debate recently on an extraordinary 75% increase in wages of the central bank. The ruling party members justified the wage increase as required to retain professional experts at the central bank, given its independence to take such decisions. The opposition responded that same experts caused the economy's bankrupt in 2022 and questioned the rationale of the wage increase while the rest of the economy is timed. Most do not understand that the central bank can make any spending by simply printing money digitally in its computers. Therefore, this short article will explain how the central bank and its experts should be held responsible for the economic crisis confronted by ...