Independent central bank needed for stable cost of living in Sri Lanka: economist

August 27, 2006 (LBO) – Sri Lanka should have an independent central bank which can conduct prudent monetary policy in order to have low inflation, a prominent European economist said. “You know richer people, who can get the help of good accountants good advisors can normally avoid the biggest suffering even from inflation,” says Deutche Bank’s Walter. “But the poor man or poor woman with a little savings deposits, they are the persons who suffer from runaway inflation.”

The Central Bank Senior Deputy Governor and the Deutsche Bank Head of Communications to the Asia Pacific Region have responded to this story.

Please click here for their clarifications The bank, which lacks the institutional independence to escape fiscal dominance, is forced to bridge the budget deficit with central bank credit.

Instead of strengthening the national currency, the Central Bank of Sri Lanka is regularly forced to torpedo the rupee by printing large volumes of money for the Treasury.

Independent policy

“The most successful cases of monetary management indeed poin