Apr 07, 2016 (LBO) – Sri Lanka’s Prime Minister Ranil Wickremesinghe who is currently on an official visit to China is to sign an MOU in view of maintaining financial stability of the country by enhancing liquidity of the market.
The cabinet nod has been given to the above proposal yesterday at the weekly cabinet meeting.
Prime Minister revealed Parliament recently that Sri Lanka is currently looking at one billion US dollars worth currency swap agreement with China.
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Sri Lanka received a 700 million US dollars currency swap from the Indian Central Bank earlier last month.
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The expected MOU will also cover the development of agriculture and infrastructure in Sri Lanka, the cabinet said.
How can you enhance market liquidity with a MOU? Are they trying to sell state enterprises in the stock market to Chinese investors? Such an irony after claiming Chinese investment in infrastructure as selling the country to the Chinese. Shameless irresponsible creature these politicians.
You need to mop up rupee liquidity when it raises its head, and increase policy rates gradually, to maintain financial stability. Yes, interest rates going up is not good for corporate debt growth and bank lending (which will trigger more imports), but it is better than the alternative. Secondly you should not use reserves to defend the rupee, and you should not print money for consumption purposes and political expediency. The inflation that this creates will completely negate the benefits given, and there will be people on the streets. I hope the government has got good economic advisors. When they get IMF, China, India, FDI or Belgian parked (?!) USD they should release it to the market rather than shore up CB reserves. Belweather and your own Fussbudget (are they the same person?) were right all along.