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Money printing: CBSL says no adverse impact

The Central Bank of Sri Lanka (CBSL) stated that it sees no adverse impact of issuing liquidity to the market to ensure sufficient currency circulation in the country during the coronavirus pandemic.

Addressing a webinar last Friday (22) on the state of the economy, challenges, and outlook as reflected in the CBSL Annual Report 2019, CBSL Senior Deputy Governor Dr. P. Nandalal Weerasinghe said it was the prime responsibility of the CBSL to provide sufficient liquidity to the banking sector and public to enable them to conduct transactions and facilitate sufficient currency circulation or ensure adequate cash in hand, especially during the lockdown period.

Elaborating on money printing by the CBSL, he said if the CBSL did not issue enough liquidity, the public would not have enough currency in hand and the banking sector would not have been able to run smoothly.

“Pumping more liquidity into the market, which is not excessive when compared to the overall monetary expansion, will not cause any adverse impact such as overheating of the economy, or high inflation,” he assured.

It is the prime responsibility of the CBSL, especially given the debt moratorium, the fact that banks are facing liquidity issues, and that people would like to hold cash in hand, he said.

He also added that it was not only the CBSL that had issued enough liquidity to the market but also other countries, which had issued liquidity exceeding 10% of their GDPs.

By Maheesha Mudugamuwa