South Asian inflation risk from money printing: economist

WASHINGTON, November 11, 2009 (AFP) – Rising inflation is posing a threat to South Asia, with the situation most worrying in the Maldives where a foreign currency black market has emerged, a senior World Bank economist has warned. Noting that the median inflation rate in South Asia was more than twice that of Latin America and the Caribbean, economist Eliana Cardoso asked whether policymakers in the region should be concerned “and wonder whether they are doing something wrong.”

In the third quarter of 2009, inflation in South Asia, which aside from the Maldives comprises India, Pakistan, Nepal, Bangladesh, Afghanistan, Sri Lanka and Bhutan, hit an average 10.9 percent, the World Bank said.

It compares with just 2.9 percent in Latin America and the Caribbean.

“From the price stability perspective the most worrying situation is that of the Maldives,” Cardoso, the bank’s chief economist for the South Asian region, wrote on the “World Bank’s End Poverty in South Asia” blog.

She said that the budget deficit in Maldives, the region’s most exotic tourist destination, was projected to reach 33 percent by the end of the year and “a black market for foreign currency has emerged.”

Cardoso noted that the Maldives gove