Sri Lanka’s economic troubles mostly home brewed: economists

Mar 22, 2009 (LBO) – Sri Lanka’s current balance of payments troubles are mostly home brewed and an expected return to an International Money Fund bailout is simply a new cycle in a long history of economic mismanagement, economists said. “This is a home brewed macro economic crisis,” Razeen Sally from the London School of Economics, said in Colombo.

“It is not a result of global forces for the most part.”

Sri Lankan-born Sally who is in the International Political Economy unit of the LSE, was addressing a forum organized by the European Chamber of Commerce.

BOP Crisis

Sri Lanka has asked for a bailout from the IMF after foreign reserves plunged from 3,424 million US dollars at the beginning of September 2008 to 1,415 million US dollars in January 2009.

Sri Lanka is also facing a collapse in international trade, trouble in sub-prime lenders that served small enterprises and the property sector, a burst property bubble and lagged effects of high inflation from loose fiscal and monetary policy.

High budget deficits and money printing has been a problem since shortly after the island gained independence from Britain in the middle of the last century.

In 1950 a central bank was created with money