Sri Lanka has printed 877-day and 955-day money through an outright auction, at around 13.7 per cent, official data shows.
One billion rupees of 877-day money was printed at 13.70 and 13.75 per cent (average 13.71 per cent) following an outright purchase of bonds by the central bank.
Half a billion rupees of 955-day money was printed at 13.70 to 13.75 per cent.
However, the central bank is not carrying out a net inflationary policy as it has been selling down short-end securities and it earns coupons on bond holdings.
Analysts had pointed out that Sri Lanka’s new central bank law was no bar to an agency that is intent on printing money to suppress interest rates and in any case it had effectively won goal independence to continue to create 5 per cent inflation, about two and a half times the rate found in countries with monetary stability and sharply higher than Singapore, a country which maintains inflation below 2 per cent in most years watching a ‘core inflation’ index which includes energy and commodity prices.
Singapore does not have a policy rate.
Western SOE central banks started to print money to mis-target rates in the last century leading to chronic balance of payments troubles, exchange controls and starting what some call the ‘age of inflation’ following the defeat of sound money, misleading politicians.
The principle was articulated by Scottish Mercantilist John Law as follows: “I maintain that an absolute prince who knows how to govern can extend his credit further and find needed funds at a lower interest rate than a prince who is limited in his authority.”
Source: Economynext
