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Sri Lanka Aims To Halt Money Printing As Inflation Nears 60%

The prime minister of Sri Lanka announced on Tuesday that the country will totally stop printing money in order to curb the sharp rise in the cost of goods, with inflation anticipated to hit 60% this year.

The 22 million-person nation is in the midst of its worst economic crisis in decades and has been unable to pay for basic imports for months due to a severe dollar shortage brought on by economic mismanagement and the COVID-19 pandemic’s effects on its tourism-based economy.

Numerous services have been shut down as a result of the severe shortages of food, medication, and gasoline that began in March. The island country was compelled to close its schools and stop supplying fuel to all but the most critical services.

In June, consumer prices increased by 54.6 percent compared to the same month a year earlier, with transportation costs rising by 128 percent and food costs by 80 percent.

“Our plan is to control inflation. By the end of this year, inflation will rise to 60 percent,” Prime Minister Ranil Wickremesinghe told parliamentarians.

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“In 2023, we will have to print money with restrictions on several occasions. But by the end of 2024, it is our intention to stop printing money completely.”

After tense bailout negotiations with the International Monetary Fund last week, Wickremesinghe outlined the forthcoming measures.

The strategy, according to the premier, who took office in May and is also the finance minister, aims to lower inflation so that it reaches between 4 and 6 percent by 2025.

Wickremesinghe stated that Sri Lanka is entering into negotiations with the IMF as “a bankrupt country” and provided a road map for how to resolve the situation. By the end of August, the government intends to submit its debt-restructuring proposal to the IMF for approval.

It is in accordance with the aspirations of the fund to stop producing money.

“The IMF will not like printing of money; if they have to abide by the IMF, (the) printing of new notes will have to be avoided,” Murtaza Jafferjee, economist and chairman of the Colombo-based think tank Advocata Institute, told Arab News.

“Printing money means the central bank is funding the government; under the IMF agreement we will have to enact the new monetary law act which will restrict funding the government so it will automatically stop.”

He claimed that the actual inflation rate might be greater than expected.

“It can get worse if we have further supply chain blocks or fuel prices will increase further.”

The tourism industry, which contributes significantly to Sri Lanka’s foreign exchange reserves, may offer a solution that provides assistance more quickly than the IMF bailout loan, which may take months.

The South Asian nation received more than 1.9 million visitors in 2019. The number decreased to less than 200,000 last year when COVID-19 limitations upended the hospitality sector. As of the first half of 2022, 380,000 tourists had already entered the nation, according to the Sri Lanka Tourism Development Authority, thus it is gradually rising up again.

“We have to ensure that tourism makes a strong recovery in the second half of the year,” Jafferjee said.

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Adoga Stephen
Adoga Stephen is a trained journalist, researcher, creative writer and freelancer. He studied Mass Communication at the Lagos State University of Science and Technology (then Laspotech) and acquired requisite skills for the practice of journalism, a profession he has been practicing since 2016.

The prime minister of Sri Lanka announced on Tuesday that the country will totally stop printing money in order to curb the sharp rise in the cost of goods, with inflation anticipated to hit 60% this year.

The 22 million-person nation is in the midst of its worst economic crisis in decades and has been unable to pay for basic imports for months due to a severe dollar shortage brought on by economic mismanagement and the COVID-19 pandemic’s effects on its tourism-based economy.

Numerous services have been shut down as a result of the severe shortages of food, medication, and gasoline that began in March. The island country was compelled to close its schools and stop supplying fuel to all but the most critical services.

In June, consumer prices increased by 54.6 percent compared to the same month a year earlier, with transportation costs rising by 128 percent and food costs by 80 percent.

“Our plan is to control inflation. By the end of this year, inflation will rise to 60 percent,” Prime Minister Ranil Wickremesinghe told parliamentarians.

READ MORE: US Navy To Reward Tips On Illicit Weapons Or Narcotics Cargos

“In 2023, we will have to print money with restrictions on several occasions. But by the end of 2024, it is our intention to stop printing money completely.”

After tense bailout negotiations with the International Monetary Fund last week, Wickremesinghe outlined the forthcoming measures.

The strategy, according to the premier, who took office in May and is also the finance minister, aims to lower inflation so that it reaches between 4 and 6 percent by 2025.

Wickremesinghe stated that Sri Lanka is entering into negotiations with the IMF as “a bankrupt country” and provided a road map for how to resolve the situation. By the end of August, the government intends to submit its debt-restructuring proposal to the IMF for approval.

It is in accordance with the aspirations of the fund to stop producing money.

“The IMF will not like printing of money; if they have to abide by the IMF, (the) printing of new notes will have to be avoided,” Murtaza Jafferjee, economist and chairman of the Colombo-based think tank Advocata Institute, told Arab News.

“Printing money means the central bank is funding the government; under the IMF agreement we will have to enact the new monetary law act which will restrict funding the government so it will automatically stop.”

He claimed that the actual inflation rate might be greater than expected.

“It can get worse if we have further supply chain blocks or fuel prices will increase further.”

The tourism industry, which contributes significantly to Sri Lanka’s foreign exchange reserves, may offer a solution that provides assistance more quickly than the IMF bailout loan, which may take months.

The South Asian nation received more than 1.9 million visitors in 2019. The number decreased to less than 200,000 last year when COVID-19 limitations upended the hospitality sector. As of the first half of 2022, 380,000 tourists had already entered the nation, according to the Sri Lanka Tourism Development Authority, thus it is gradually rising up again.

“We have to ensure that tourism makes a strong recovery in the second half of the year,” Jafferjee said.

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