Jan 10, 2007 (LBO) – After more than 50 years of failing to achieve price stability according to its own mandate, Sri Lanka’s central bank is facing unprecedented fire from critics as awareness of the dangers of unbridled, pure fiat central banking spreads in the country. Last year the Central Bank inflated the island’s economy by 16.4 percent, or 18.8 percent based on a newer inflation index, despite widely acknowledged, and partially successful attempts to contain inflation to single digits in the first half the year.
This year Central Bank Governor Nivard Cabraal is trying again, in the face of many of the same challenges, though the targets are now in easy double digits. He says the monetary authority is not ready for a legislated inflation target yet.
Shamindra Kulamannage from ETV’s Lanka Business Report (LBR) talked with Governor Cabraal to find out how he planned to keep the economy stable in 2008. Excerpts from the interview:
LBR: Governor, what would you think will be the major monetary policy challenges this year?
Governor Cabraal: There are three major areas we need to be conscious about. First would be the commodity prices and the oil prices. Oil has hit 100 dollars a barrel we don’t know where it would settle during this