Ex-MP Rohini Kaviratne criticises CB’s money-printing mechanism amidst rising prices

By: Isuru Parakrama

October 31, Colombo (LNW): Former MP Rohini Kaviratne has highlighted the Central Bank of Sri Lanka’s (CBSL) recent activities in money creation, questioning the economic policies that she says are increasing inflation and adding to public economic burdens.

In a statement, Kaviratne clarified that whilst money should be minted by the Central Bank, she believes that the government’s approach equates to money printing, a process she detailed as being enacted through term and overnight auctions.

In her statement, Kaviratne noted that the Central Bank injected Rs. 36.16 billion into the monetary system on October 25 via an overnight auction, and Rs. 70 billion through term auctions over the past week.

She emphasised that neither the Central Bank nor the Cabinet Media Spokesman, Minister Vijitha Herath, have contested these figures.

Kaviratne also referenced economist and JVP Economic Committee member Prof. Nandasiri Keembiyahetti’s recent acknowledgment on social media of these mechanisms being forms of money printing.

Furthermore, she cited an increase in excess liquidity within the Central Bank’s standing facility, from Rs. 138 billion to Rs. 193.4 billion, up to October 25.

Kaviratne asserted that this shift reflects an expansionary approach to financing the government’s treasury bill issuances, with Rs. 80.9 billion raised through these means so far.

She criticised the government’s push to increase inflation, noting that despite a temporary dip in inflation last month, the Central Bank now aims for a positive inflation rate, aligned with the IMF’s target.

According to Kaviratne, this shift has raised prices for consumers, impacting most goods except vegetables in recent weeks.

Referring to Minister Herath’s comments on currency notes bearing the finance minister’s signature, Kaviratne asserted that modern-day money creation extends beyond traditional note printing. She emphasised that money creation in the digital age involves diverse forms, such as credit, electronic payments, and even cryptocurrency.

Kaviratne concluded her statement by urging the public to consider the implications of these economic policies. She argued that, if money creation and borrowing reflect government policy, it warrants open public discourse as these decisions stem from a mandate granted in the Presidential Election.