Sri Lanka central bank profits fall in 2010; sells gold

Apr 19, 2011 (LBO) – Profits of Sri Lanka’s central bank fell 65.1 percent to 11.7 billion rupees in 2010 as the cost of domestic monetary operations and rupee appreciation generated losses but made capital gains from gold sales. In 2009 the Central Bank made profits of 33.6 billion rupees largely as a result of high yield government securities holdings it acquired before and during a balance of payments crisis.

A central bank typically makes profits from inflation, either by financing the government with printed money (income from domestic assets) or currency depreciation or both.

High central bank profits are an indicator of substantial burdens imposed on the people, either through high inflation and interest rates or currency depreciation. Lower profits may point to a less inflating monetary authority.

However in Sri Lanka some forms of printed money given as ‘provisional advances’ to the finance ministry do not yield interest.

The British built a pegged exchange rate monetary authority in Sri Lanka in 1885 (a currency board) to give some profits from money issue (seigniorage) to the colony.

A pegged exchange rate monetary authority can make some profits without harming people too much by holding i