Sri Lanka Central Bank rejects gold reserve sale charges as criticism mounts

Nov 20, 2007 (LBO) – Sri Lanka's Central Bank has rejected allegations it had sold tonnes of gold reserves to fund government expenditure in recent months, while criticism mounts on the way foreign reserves are used by the authorities. It said in a statement that a fake letter was circulating that it had sold 7,000 kilos of 24 carat gold bullion.

The bank said the Ministry of Finance and Planning had complained to the police Criminal Investigations Department about the letter.

"It appears that certain interested parties are making use of this fake letter to spread a canard that the country’s gold reserves are being sold in order to enable the government to meet its expenses," the Central Bank said.

"The public is hereby notified that such allegations are blatantly false."

Economic analysts have also charged that the state had used foreign dollar reserves to meet expenses either directly or indirectly through money printing driven imports.

In most countries reserve appropriation needs parliamentary approval. Calls have been increasing in recent months for fundamental reforms of Sri Lanka's monetary law to prevent the government from mis-using the money supply to meet cash shortages. .

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