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Wednesday February 1st, 2023

Behind Sri Lanka economic crisis are also Lakshman, Jayasundera, Cabraal, Attygalle: legislator

ECONOMYNEXT- Behind Sri Lanka’s economic crisis are a set of officials that made policies in President Gotabaya Rajapaksa’s party, a legislator said as a ‘flexible’ exchange rate which is not a clean float collapsed after two years of money printing.

“We have accepted that during the last two years deep (barapathala) economic management problems have arisen,” Sri Lanka Freedom Party legislator Charitha Herath, a legislator told a forum of civil society activists in Colombo.

“We can mention several persons, the former Central Bank Governor W D Lakshman is one. I am telling this because it is not correct to only blame the political side.

Herath was a former ministry secretary under President Mahinda Rajapaksa.

“This political-economic discourse happened with a set of our officials like  Dr. P B Jayasundra, Ajith Nivard Cabraal, (Sajith) Attygalle,”

“So all these persons are linked to this to a greater or lesser extent.”

Analysts have said a 1979 constitution that ended permanent secretaries allowing President to appoint and sack them destroyed the independent public service and made senior official political acolytes.

During the last ‘Yahapalana’ administration the ‘impermanent secretaries were shuffled several times. Analysts have called for permanent secretaries and permanent ministries to be brought back.

Both Jayasundera and Attygalle were former ‘impermanent secretaries’.

Lakshman, a former economics professor was a self-declared post-Keynesian. Keynesian stimulus taught at Western universities like Cambridge, Oxford, Harvard, Yale and Princeton had brought many countries to ruin including the UK and US.

Sri Lanka cut taxes in December 2019 and printed large volumes of money for ‘stimulus’ said to be using ‘Modern Monetary Theory or ‘alternative’ policies.

From November 2019 Sri Lanka’s central bank has printed 2.055 trillion rupees to trigger balance of payments deficits (forex shortages) and expand reserve and broad money to drive up inflation using a ‘flexible’ central bank policy that has a free for all constitution.

The monetary stimulus had been labelled the ‘Lakshman shock’ by W A Wijewardene, a classical economist.

However similar but less intense Keynesian policies triggered two currency crises in 2015/16 and 2018.

Then-Prime Minister Ranil Wickremesinghe openly admitted to Keynesian stimulus in the first crisis while other members of his party were pushing for a social market economy that needed monetary stability.

The International Monetary Fund also gave technical assistance to the central bank to calculate an ‘output gap’, a key tool to print money and goose the money supply. (Colombo/Apr08/2022)

Comments (5)

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  1. Sisira Bandara says:

    Well and bravely analised Prof.Herath. We need persons of your caliber to steare the Country out of this mess. May you tribe increase

  2. Gary White says:

    Unfortunately we have had a leadership of incompetence, we have seen appointments of ministers who’s ability or credit is being related to the President, who completely ignored the selection process without credentials, the same was exposed in the government institutions, bringing in ex military to head these institutions without any civil service experience, who already receive a handsome military pension. It’s time the government selected personal on a criteria of credentials Not friendship, we have seen enough of misfits in government

  3. Nanda says:

    ndissanayaka2001@yahoo.com.au

    It is very interesting article.we need to act fast reestablish SL economy.professor take incharge to advise new finance minister

  4. Rtd. Lt. Reginald Shamal Perera says:

    “Keynesian stimulus taught at Western universities like Cambridge, Oxford, Harvard, Yale and Princeton had brought many countries to ruin including the UK and US.”

    Stop the humour. This is not a comedy show to make such crude jokes.

    Keynesian economics have brought countries like US and UK to ruin huh?

    This coming from a country still living in total darkness without the ability to afford a bit of electricity.

  5. Garvin Karunaratner says:

    A study of the following books written by me may be of use to understand what happened. How the IMF Ruined Sri Lanka & Alternative Programs of Success(Godages 2006, How the OIMF Sabotaged Third World Development , Godages/Kindle, 2017 and How the IMF’s Structural Adjustment destroyed Sri Lanka, Godages:2022.

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Comments (5)

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Your email address will not be published. Required fields are marked *

  1. Sisira Bandara says:

    Well and bravely analised Prof.Herath. We need persons of your caliber to steare the Country out of this mess. May you tribe increase

  2. Gary White says:

    Unfortunately we have had a leadership of incompetence, we have seen appointments of ministers who’s ability or credit is being related to the President, who completely ignored the selection process without credentials, the same was exposed in the government institutions, bringing in ex military to head these institutions without any civil service experience, who already receive a handsome military pension. It’s time the government selected personal on a criteria of credentials Not friendship, we have seen enough of misfits in government

  3. Nanda says:

    ndissanayaka2001@yahoo.com.au

    It is very interesting article.we need to act fast reestablish SL economy.professor take incharge to advise new finance minister

  4. Rtd. Lt. Reginald Shamal Perera says:

    “Keynesian stimulus taught at Western universities like Cambridge, Oxford, Harvard, Yale and Princeton had brought many countries to ruin including the UK and US.”

    Stop the humour. This is not a comedy show to make such crude jokes.

    Keynesian economics have brought countries like US and UK to ruin huh?

    This coming from a country still living in total darkness without the ability to afford a bit of electricity.

  5. Garvin Karunaratner says:

    A study of the following books written by me may be of use to understand what happened. How the IMF Ruined Sri Lanka & Alternative Programs of Success(Godages 2006, How the OIMF Sabotaged Third World Development , Godages/Kindle, 2017 and How the IMF’s Structural Adjustment destroyed Sri Lanka, Godages:2022.

Sri Lanka bond yields down at close

ECONOMYNEXT – Sri Lanka’s bond yields were down at close following a bond auction on Wednesday, dealers said while a guidance peg for interbank transactions remained unchanged.

“The rates were steady at the auction,” a dealer said.

“This can be a signal to the market saying the rates will go down in the future.”

A bond maturing on 01.07.2025 closed at 32.40/60 percent, down from yesterday’s 32.60/85 percent.

A bond maturing on 01.05.2027 closed at 29.10/35 marginally down from yesterday’s 29.20/75 percent.

The Central Bank’s guidance peg for interbank US dollar transactions remained unchanged at 362.14 rupees against the US dollar.

Commercial banks offered dollars for telegraphic transfers at 371.38 rupees on Friday, data showed. (Colombo/Feb 01/2022)

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Sri Lanka bill auction hits pothole after 2025 bond spike

ECONOMYNEXT – Sri Lanka sold only 45 billion rupees in Treasury bills at Wednesday’s auction after offering 120 billion rupees, data from the state debt office showed, amid market confusion over a spike in a two year bond at an earlier action.

30.1 billion rupees of 3-month bills were sold at 29.91 percent, unchanged from a week earlier after offering 60 billion rupees for auction.

5.1 billion rupees of 6-month bills were sold at 28.72 percent, flat after offering 30 billion.

10.3 billion rupees of 12-month bills were sold at 27.72 percent after offering 30 billion.

Phase II subscriptions have been opened.

The market was foxed after the 2025 bonds were accepted at sharply higher yield than market on January 30, dealer said.

There was further confusion as the there was an outright purchase of 2025 at around 29 percent earlier in January.

Some investors speculated that the authorities were trying to drive more buyers towards short end bonds as bill volumes were getting larger. (Colombo/Feb01/2023)

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Sri Lanka services exports down 5.9-pct in 2022

ECONOMYNEXT – Sri Lanka’s services exports were estimated to have fallen 5.9 percent to 1,876.3 million US dollars, the island’s Export Development Board said.

Services exports estimated is made up of ICT/BPM, construction, financial services, transport and logistics.

There are more than 500 ICT companies, the EDB said.

Sri Lanka’s merchandise exports were up 4.6 percent to US dollars 13.1 billion dollars in 2022 from 2021.

Sri Lanka’s goods exports are slowing amid lower growth in Western markets. (Colombo/ Feb 01/2023)

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