Sri Lanka central bank officials to be summoned to party leaders meeting over steep pay hike

ECONOMYNEXT – A Sri Lanka parliamentary committee has summoned central bank officials to a party leaders’ meeting over a steep pay hike given to themselves, a statement said.

At the parliament’s business committee meeting chaired by Speaker Mahinda Abeywardana, a decision was taken to summon central bank officials a decision was taken to summon central bank officials to the Party Leader’s meeting on March 05, the statement quoted Secretary General Kushani Rohanadeera as saying.

Legislators have questioned steep salary hikes to central bank officials, after the agency printed money (cut rates with inflationary open market operations) and triggered a crisis collapsing the rupee from 200 to 360 to the US dollar in 2022,

Sri Lanka has forex shortages, exchange controls due to maintaining a central bank with money printing powers to cut rates with liquidity injections which also collects reserves (is de facto unstably pegged through a ‘flexible’ exchange rate).

Since the central bank was set up to create the unstable peg in 1950, the rupee has collapsed from 4.70 when the country had a currency board (fixed exchange rate) with floating interest rates.

Under the currency board and until the Second Amendment of the IMF in 1978 allowed economic bureaucrats to print money and depreciate the currency at will, triggering severe monetary instability, Sri Lanka also had inflation and interest rates close to that of the US.

The central bank has now got permission from the political leadership to create up to 7 percent inflation under a controversial IMF backed monetary law which allows money to be printed for growth (target potential output), critics have said.

The SOE also cracks down on on the members of the public who try to escape the bad-money monopoly by using other foreign currencies. (Colombo/Mar04/2024)