Sri Lankan authorities try to counter money printing culpability

April 20, 2007 (LBO) – Authorities in Sri Lanka are trying to counter growing public awareness that 38.5 billion rupees were printed to finance the budget deficit last year, which also drove inflation to 19.3 percent by December, despite the information being publicly available. Deputy Finance Minister Ranjith Siyambalapitiya was responding to a news story in Sri Lanka’s Daily Mirror newspaper quoting an opposition spokesman, which said that billions of rupees were printed last year to pay for a large cabinet.

The minister said the cabinet was enlarged in 2006, whereas the money was printed the previous year, adding that economic growth, and the need for money in the economy also increased money supply.

Central Bank official Swarna Guneratne, who was also present at the news conference Thursday, said reserve money supply grew at a higher volume of 42 billion than the planned 30 billion for 2006, because of various challenges including oil prices.

She also claimed inflation last year was caused by rain disrupting vegetable supply and higher economic growth.

However, journalists pointed out that the Central Bank had failed to tighten monetary policy in time and lost control of the money supply last year resulting in inflation rocketing, and the severe monetar