ECONOMYNEXT- Sri Lanka's economy was badly hit by a securities scam in bonds, hurting the economy and reducing confidence, ex-Central Bank Governor Nivard Cabraal said.
"The economy is in shambles," he told reporters. "The rating has been downgraded. But they tried to cover up the bondscam."
He was speaking at a media conference where leaders of a breakaway faction of the United People's Freedom Alliance supporting the Sri Lanka Podu Jana Party called on the government to step down.
A massive securities scam involving, Perpetual Treasuries, a gilt primary dealer, hit the new administration's 'good governance' credentials and a Prime Minister Ranil Wickremesinghe delayed taking action angering the public and allowing more frauds to take place.
The central bank printed money in 2015 to keep rates down as the budget deficit expanded generating a balance of payments crisis.
The rupee collapsed from 131 to 150 in two years continued to fall under a strategy of targeting a real effective exchange rate to destroy real salaries of workers and boost exports.
Analysts had warned that the devaluationist-inflationist strategy will hurt and create economic instability. (Colombo/Feb11/2018)