Oct 13, 2012 (LBO) – Not a single representative of the public or business community that had met Sri Lanka’s President Mahinda Rajapaksa, who is also finance minister, ahead of next month’s budget said the deficit was too large, an official said. Critics say the ruling political elite of all hues, has successfully maintained a fiction of ‘the government bearing the burden,’ while steadily impoverishing the people through inflation, currency depreciation, expropriation and the expansion of the state.
Sri Lanka has run large deficit budgets after gaining self-determination from British rule, helped by a money printing central bank created in 1951 which allowed the state to inflate away its ever growing debt to citizens without default.
In 1950 Sri Lanka had a debt of 654 million rupees or 16.9 percent of gross domestic product. By 2011 it had grown to 5.1 trillion in inflated rupees and 78.5 percent of GDP.
The exchange rate had fallen from 4.76 to the US dollar and 13.33 to the Sterling and one for one with the Indian rupee in 1950 which was maintained under a currency board to 110 to the US dollar, 177 to the Sterling and 2.39 to the Indian rupee by 2011.
In 2012 however the rupee fell from 110 to 134.
In 2011, though t