Economists had been predicting that inflation would continue to rise despite falling oil prices because of excessive money printing to finance the budget deficit.
According to the latest data, Central Bank credit to government rose to 103.6 billion in September (almost a billion US dollars), with about 60 billion coming via money printed for Treasury bill purchases and the rest through accumulated direct advances from the monetary authority.
Under Sri Lankan laws, the Central Bank can be asked to print up to ten percent of the estimated revenues and hand it over to the government.
In February, Central Bank credit to government was only 61.9 billion.
Critics had been warning that the massive volumes of printed money would put pressure on the balance of payments and send inflation up.
On a 12-month moving average, inflation for November was 12.7 percent from 11.8 percent recorded in October, the Census Department said.
With oil prices plummeting, authorities can no longer claim that inflation was rocketing due to oil prices.
"These price increases can be mainly attributed to short supply of locally produced agricultural consumer goods, specially the vegetables to the main markets in Colombo City, due to seasonality and heavy monsoon," the Department of Census and Statistics said instead.
Though monsoons do contribute to vegetable price rises and November and December are traditionally high inflation months, critics point out that demand pressure, and a depreciating rupee, which is also caused by excessive money printing, is the primary driver behind the unusual jump in inflation.
In 2004, as the government printed money to fix oil prices, causing a balance of payments crisis in the process, inflation in November jumped by 3.4 percent and in December by 3.7 percent, compared to around a 2 percent jump in other years.
But at the time 12-month inflation was only 13.8 percent.
The Central Bank's key policy rate is now 11.125 percent compared to the 12-month inflation rate of 19.8 percent.
Instead of raising interest rates and cutting central bank credit to government, the monetary authority has been trying to curb credit to private sector through various administrative measures.
I stand corrected.Thank you.
if you think the use of credit cards has any influence on the amount of printed money in circulation in the economy, you're misguided my friend.
Besides that, I dont think credit card use should be curbed. If at all, it should be encouraged and at the sametime regulated to make sure proper credit assessments/rating etc are taken and people are not misusing credit.
the GOSL does need to handle both issues seperately.
if so, GOSL needs to address both isssues seperately.
They actually do not have anything much to be robbed of and so what the chinthanaya does makes very little difference to them.
It is the middle and upper middle classes who dream of living the modern dream who are being robbed by rising inflation. Obviously this middle and upper middle class constitutes a very small minority.
This minority can on the one hand work towards winning over the impoverished millions to their dream of a house, a car, a refrigerator, a TV and multimedia system etc and convincing them that this is indeed possible for all these millions to achieve.
Or they can come up with a more rational and workable alternative model to the chinthanayas money printing machines.Simply sitting around screaming as the anxiety rises is no solution.
If they dont stop it soon no one will be able to afford anything.
Over the years the CB continously mislead the people. Is the inflation due to Oil Prices? Or is it due to vegetable prices or the War?
These professionals at the CB is busy giving flimsy excuses and not focus on finding a solution to the ever more imprtant issue of the country? Where are all those with Phd in economics? What happened to your years of training?
Sure, there must be some sort of counter measures to control this inflation rate.
Why don't you focus on controling inflation rates before youur can control the world market oil prices by trying to introduce complexed oil hedging using
Derivatives a are that you have very limited knowlege. ou must be better at controlling inflation. So please do that.
What are the professionals at the Central Bank doing while their political master is ruining this country?
Who is standing up for the millions of poor people who are being robbed by this inflation tax?
Come on people; stand up against this crime!
Sena, it is hard to find anyone who is for the chinthanaya now. They are all saying: if only we knew better.
Its not ONLY the Chinthanaya. Its the people who are operating within the Chinthanaya.
And its the fact that CBSL is not a political entity.
The governer of the CBSL has to be someone who can (personally) and must (as per the powers vested in him) stand up to the Treasury and say "no, no more credit. Enough"
This loss in value in our money cannot be just regained overnight.
Would those defending the Chinanthanaya please explain why, if this level of inflation is not an issue?
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