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Wednesday February 1st, 2023

Venezuela printed money like Sri Lanka driving women into prostitution: Kabir

ECONOMYNEXT – Venezuela printed money like Sri Lanka under populist policies of Hugo Chavez and the country’s women turned to prostitution and millions fled the country, opposition legislator Kabir Hashim said.

“Sri Lanka is now in the position of where Venezuela was several years ago,” Hashim told parliament.

“Hugo Chavez did populist politics and bankrupted the country. Experts have pointed out that printing money and spending beyond income and the loss of reserves.

“Venezuela did everything that Sri Lanka did. As a result 6 million became refugees. They went to other countries like people take passports and go abroad.

“These fleeing women turned to prostitution to feed their families. I am telling the government Sri Lanka is at a dangerous position.”

Latin America has among the world’s worst central bank’s build by US money doctors from the Federal Reserve modeelled Argentina’s central bank.

“Starting in the mid-1940s, the Treasury and subsequently the United States Federal Reserve organized a series of missions (to Paraguay (1943-44), Dominican Republic (1945) and Venezuela (1948)), headed for the most part by Robert Triffin (1911-1993),” according writes Esteban Pérez Caldentey and Matías Vernengo in The central banking system and monetary policy in the centre and the periphery: Prebisch as a central banker and ‘money doctor’.

“Triffin invited Raúl Prebisch to collaborate on these missions and highlighted his influence on proposals for reform of the banking system in those countries.”

Sri Lanka’s central bank was also set up by a Fed expert on the model of Argentina’s central bank with extensive sterilization powers (to use foreign reserves for imports and print money to keep rates down effectively re-financing the private sector) triggering currency crises easily as domestic private or state credit picked up.

“This law (Monetary Law Act) has been drawn up under American tutelage and along the lines of lines that have been the subject of experiment in some Latin American countries some eight years past,” a classical economist wrote in The Banker magazine of August 1950, adding prophetically.

“The step from an ‘automatic’ currency system (such as that which Ceylon inherited with its old Colonial Currency Board) to an ultra-modern currency system is necessarily fraught great dangers and there may be some who will regret that Ceylon has decided to run such risks at this time.”

Sri Lanka is now planning to enact and even more discretionary law incorporating flexible inflation targeting perhaps the most deadly impossible trinity monetary regime peddled to hapless third world nations with reserve collecting central banks but without a doctrinal foundation in sound money, critics say.

Argentina’s last default took place while ‘flexible’ inflation targeting.

Collapsing currencies and high nominal interest rates that come from countries with frequent currency crisis makes budgets unmanageable while growth falls and out-migration is triggered. The currency collapses makes it difficult for people to live and they ask for subsidies.

Countries that went in the opposite direction in East Asia and in the Gulf and maintained currency stability and made it impossible for economists to print money have instead prospered and attracted foreign guest workers. Iran, another country ‘helped’ by US money doctors collapsed.

Sri Lanka also attracted large scale foreign investment (into plantations, finance, energy among other areas) during its currency board era and drawing in-migration. Many of the FDI was later expropriated (like in Venezuela) as leftist leaders like Chavez was elected along with their advisors.

One of the problems in Venezuela was a surrender rule that forced its (repeatedly expropriated) state oil corporation PDVSA to sell dollars to the central bank creating money, and pushing the currency down.

Sri Lanka also imposed a surrender rule in the 2020/22 crisis, leading to a swift collapse of the currency as a float was attempted. (Sri Lanka bank dollar surrender rule hiked to 25-pct).

Like in Sri Lanka’s Ceylon Petroleum Corporation, PDVSA firm was forced to borrow dollars, as forex shortages came. It defaulted about 25 billion dollars to bondholders in the last currency collapse.

Venezuela however survived until the mid 1980s when it was encouraged to depreciate (flexible exchange rate or BBC policy) leaving the country without an effective anchor for monetary policy.

Several of the countries with Prebisch-Triffin central banks have now become dollarized, including El Salvador and Ecuador.

Sri Lanka’s main opposition Samagi Jana Balawegaya was against the budget 2023 because the government was setting a bad example with a 37 ministers and no action against corruption, Hashim said.

“Reform must begin at the top. The government should be shrunk” Hashim said.

“We are not against reforms. However the pain must be shared. The first reform must starte from the government, if you want people to accept the pain it must be shared equally.

“Otherwise it will create social upheaval. Thirty seven ministers is a bad example.”

There were also problems with politicization of welfare spending he said.

The budget also had not put forward measures on battling corruption.

“The issue of corruption has not been addressed,” he said. “That is a very important matter.” (Colombo/Nov22/2022)

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  1. veddah says:

    Neither Venezuela nor Sri Lanka is socialist. Sri Lanka is a pseudo democratic. Dictatorship

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  1. veddah says:

    Neither Venezuela nor Sri Lanka is socialist. Sri Lanka is a pseudo democratic. Dictatorship

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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