Economy Forward

  Article's Background According to CB's annual financial statements released on 25 April 2024, the loss of the CB for its independent monetary and financial operations in 2023 was Rs. 114.4 bn. In addition, the profit remittable to the government for the year was negative Rs. 313.7 bn. I never heard of a central bank estimating of negative dividends.  The CB escaped bankruptcy, thanks to interest income of Rs. 522.5 bn received on its huge investment portfolio of government securities, again thanks to CB's sky rocketed interest rate policy on government securities. Even a man on the road may wonder why the CB run by an esteemed class of international economists and experts by printing of money as they wish (central bank independence) makes such colossal losses and who are accountable to and who pay for such losses. Although CB financial statements are difficult to understand, they show many arbitrary operations hiding behind the independent monetary policy responsible for ...

  Article's Background World over, the monetary policy independence of central banks has now come under heavy attack. The major reason is their inability to assure the post-pandemic price stability despite the underlying monetary theory. Devastating effects of high interest rates policy adopted during the past two years on both real sector and financial sector have deterred the recovery of global supply chains and bottlenecks caused by the pandemic and subsequent geopolitical issues. As a result, livings standards are eroded while a new global waive of poverty has surfaced. The debt and foreign currency crisis confronted by the developing world has become the new conduit for the geopolitics and poverty. The fact of the matter is the inability of central banks to tame inflationary pressures despite sky rocketed interest rates. In this background, not only independence but also instrument suitability of monetary policy are now being questioned. While the suitability of policy interes...

  Article's Background The CB has released its inaugural reports as required in sections 80 and 99 of the Act on 25 April 2024 as follows. Annual Economic Review 2023 - in terms of section 80 Financial Statements and Operations of the Central Bank 2023 -  in terms of section 99 This is in contrast to the requirement of the annual report of the Monetary Board under the Monetary Law Act that governed the Monetary Board/CB up to 14 September 2023 since its inception in 1950. By looking at two new reports, I wonder whether this is the independence consciously given by lawmakers to the Governing Board/CB to operate even  without   a standard annual report. The annual report is a requirement in good corporate governance of institutions whether private or public or business or non-business, irrespective of their incorporation. The annual report is an official means to the general public to know the objectives, business operations, management system, business performance, fi...

  Article's Background I happened to read an article titled " Jeremy Hunt urged to review Bank of England’s independence" published in an international website " The Telegraph" on 20 April 2024  (read the article here) . This article is about a written request of 40 senior Conservative Party lawmakers demanding the UK Chancellor of Exchequer (Finance Minister) for a review of the monetary policy independence of the Bank of England (BOE). The request has given several reasons why the present BOE is not in the interest of the general public. During the past few decades, almost all country governments have followed the BOE model of central bank monetary policy independence. This independence means that the central bank has the freedom to use its policy instruments to control the inflation at low levels, irrespective of the rest of the economy and government policies. Sri Lanka is the latest (14 September 2023) to this independence list which has already created en...