ECONOMYNEXT – Sri Lanka’s stock market saw 49 million US dollars in net inflows to the, compared to an outflow of 26 million US dollars, taking the total in the first two months to 85 million US dollars, central bank data showed.
In December 2022, there was a marginal 4 million US dollar inflow to stocks, followed by a 36 million US dollar inflow in January.
In 2022 as a whole there was a 238 million US dollar outflow from stocks up from 225 million US dollars a year earlier, as economists printed money to boost growth and close an output gap (Keynesian stimulus) after also cutting taxes to close what was claimed to be a ‘persistent output gap’, scaring investors.
The money printed by the central bank also helped drive credit at low interest rate, including margin loans, driving up stocks and helping foreigners sell, leading to reserve sales to maintain the exchange rate.
Analysts, investors and classical economists have called for a currency board to be set up to block Keynesians from printing money to target an output gap, target call money rates, target the yield curve (by monetizing debt of past deficitis) to create external crises.
The creation of economic price instability using central bank independence, violates Section 5 (a) of the central bank’s constitution, critics have said.
Sri Lanka’s central bank was set up in 1950 by a US money doctor in the style of Argentina’s BCRA, with a US dollar cum gold peg, with a false claim that it had monetary policy independence. (Colombo/May12/2022)