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Government denies ‘excessive’ money printing 

03 Jul 2021

  • Only Rs. 200 b to payoff budget’s provisional advance: Cabraal 

  • Money supply hike due to govt. borrowings: Former CBSL Deputy Government 

  • Claims 32% increase in 17 months; goods/services Rs. 2,400 b, borrowings Rs. 2,600 m 

  • Fitch warns of big banks’ heightened sovereign risk, weaker capital positions 

By Yoshitha Perera     Denying claims made by various parties against the Government regarding excessive money printing, Money and Capital Market and State Enterprise Reforms State Minister Ajith Nivard Cabraal said the Government had printed money to settle the provisional advance taken by the annual budget.  At a media briefing held at the Government Information Department, he explained the money printing that took place on 28 June amounted to Rs. 200 billion.  He said: “Every central bank in the world gives a provisional advance. That is where about 10% of the money expected to be spent from the country's budget is given as a temporary advance for the work of that government in the particular year. This amount needs to be settled within six months.”  Cabraal further explained that as the work progresses, the government may however face difficulties in settling the particular amount within six months and that therefore, each year, during a similar period, the government requests the Central Bank to issue one day’s security with the consent of the Auditor General to settle the provisional advance. He added: “Accordingly, the provisional advance will be settled with that amount. Again, on the next day, we will be given the provisional advance due for this year.”  Meanwhile, speaking to The Sunday Morning, former Central Bank of Sri Lanka (CBSL) Deputy Governor Dr. W.A. Wijewardena said that over the past 17 months, the total money supply for goods and services in Sri Lanka has increased by Rs. 2,400 billion and noted that this is a critical issue.    He added: “During the last 17-month period, the Government had borrowed from the Central Bank as well as from commercial banks. Those borrowings amount to Rs. 2,600 million. Therefore, the money supply is increasing.”  Dr. Wijewardena also noted that during this period, the money supply had increased by 32%.  According to the latest report by Fitch Ratings, issued on Thursday (1), Sri Lanka's largest banks are the most susceptible to heightened sovereign risk due to their higher exposure to foreign currency-denominated government securities, and in some cases, weaker capital positions.     


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