Jan 23, 2008 (LBO) — Sri Lanka’s central bank says allegations of excessive money printing are “baseless” despite using central bank credit of 45.2 billion rupees to purchase treasury bills up to September 2007. “The attention of the Central Bank has been drawn to a few mischievous and /or erroneous reports where allegations have been made that the Central Bank has resorted to ‘wide scale money printing’ to finance the fiscal deficit of the Government,” the Central Bank said in a statement.
“It is likely that such allegations have been made deliberately to generate negative sentiment within the economy and therefore the Central Bank wishes to set out the actual position in the public interest.”
The Central Bank says it pursued a quantity targeting framework in 2007, where it targeted reserve money and broad money.
The increase in reserve money could be from the purchase of foreign exchange (net foreign assets) and domestic assets which is mostly central bank credit (printed money) to government.
“Reserve Money includes: (a) currency issued by the Central Bank; and (b) the deposits of commercial banks with the Central Bank,” the central bank said.
The Central B