Sri Lanka govt. listening to criticism over monetary policy: Harsha

ECONOMYNEXT – Sri Lanka’s current administration is listening to criticism over monetary policy instead of targeting the critics, Deputy Foreign Minister Harsha de Silva said as inflation picked up and the currency was sliding due to loose monetary policy.

"We have seen several opinions expressed by economist whom we respect about this issue," de Silva, a fierce critic of loose monetary policy of the last regime told reporters.

"As a government we are listening to them. We do not want to discount them or sling mud at them. In the past when people criticized they were hit physically or hit by the pen.

"We have not hit back at professionals who criticized our policies. We will leave it to the central bank to make its own decision.

"But yes, many people have expressed views that there should be a change in monetary policy."

De Silva had previously also declined to comment directly over monetary policy.

De Silva, an economist was addressing reporters at their party headquarter with Kabir Hashim, Minister of Enterprise Development who is also an economist.

The duo were defending the government’s fiscal policies and the changes made since the budget.

De Silva is Deputy Foreign Minister, but reporters bombarded him with questions over the economy.

A newly released nation-wide inflation index had shown inflation accelerating to 4.8 percent, a reporter said.

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De Silva said the last administration had understated inflation numbers keeping out alcohol and tobacco but the new index included all goods.

"Now you see the correct inflation," he said.

Asked about a reported plan by Sri Lanka to go to the International Monetary Fund, de Silva said the Prime Minister had made the statement that the country should be prepared for expected volatility in the external environment.

"The US Federal Reserve had just raised policy rates. There is uncertainty in Russia and other places as well. There is a view among many that volatility may increase next year.

"That is why the Prime Minister said instead of waiting for the problem to come, we should be prepared ahead of time."

Other analysts had however said that it was the failure of the central bank to raise rates in time, and printing tens of billions of rupees to inject synthetic deposits into the banking system by repaying Treasury bills with printed money, as the budget deficit expanded, that brought pressure on the currency.

Any created money that is sloshing around in money markets, will hit the forex markets as imports when bank gives loans with the money. However the Central Bank has mopped up some of the created money over the last two weeks.

Sri Lanka’s central bank has a habit of printing money, delaying rate hikes, then depreciating the currency and running to the IMF. (Colombo/Dec23/2015)

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