Sri Lanka can stop inflation with currency board: Steve Hanke

Feb 02, 2008 (LBO) – Sri Lanka could end inflation by adopting a working exchange rate system and a credible external anchor in the form of a currency board, a top international monetary economist has said.

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In 2007 Sri Lanka’s official inflation hit 18.8 percent despite a target of single digit inflation based on reserve money programming. However, the index that the target was originally based on grew only 16.4 percent.

This year 10 to 14 percent inflation has been promised by the Central Bank.

Haunting Spectre

“The spectre of unanchored inflation haunts the Sri Lanka economy,” Steve Hanke, professor of applied economics at Johns Hopkins University wrote in his column in the latest issue of GlobeAsia magazine.

“Indeed, in light of the huge fiscal deficits that have been recorded year-after-year and with the civil w