Business

Money printing not responsible for price hikes price hikes: Cabraal 

 

  • Attributes inflation to global supply-side shocks
  • Says CBSL not responsible for supply changes

 

By Imsha Iqbal

Central Bank of Sri Lanka (CBSL) Governor Ajith Nivard Cabraal stated yesterday (14) that inflation has increased due to the supply-side shocks from the global market changes, and certainly not because of the money printing by the CBSL.

He made this remark during the Monetary Policy Review No. 7 of 2021 as a response to a question raised by a journalist stating printing money as the reason behind the price increase of commodities, including essential goods. 

“We know the reason why the price has been increased for many goods. It is not due to the money printing that has taken place in Sri Lanka,” Cabraal said in response.

Further explaining his stance on the matter, he said: “Gas price has not increased due to the money printing in Sri Lanka, price of powdered milk is not because of the money printing, and most of the times, we have seen changes due to global tendencies.”

He added: “In Sri Lanka, even though we (CBSL) provide statistics on certain aspects by the Economic Research Department, the main factor to the price increase is supply-side shocks.”

Cabraal added that the CBSL cannot take responsibility when it comes to supply.

The supply is affected by the circumstances that take place in foreign countries or globally.

However, with regard to the global impact of price hikes, the value of the rupee (LKR) impacts the price, and the CBSL is working on that matter.

A supply-side shock is an event that leads to a reduction of the production capacity of goods or services at a given cost.

Early this week, the prices of commodities such as domestic gas cylinders, cement, wheat flour, and milk powder were increased. Subsequently, the price of a rice packet and milk tea were announced as well amidst the prevailing pandemic.  

‘No need to go to IMF’

Central Bank of Sri Lanka (CBSL) Governor Ajith Nivard Cabraal yesterday (14) reiterated that Sri Lanka does not have a necessity to approach the International Monetary Fund (IMF) for economic support.

Cabraal told Bloomberg last morning that Sri Lanka is comfortably able to meet its repayments and therefore, did not have a necessity to go to the IMF.

The Governor noted that there were several foreign inflows including government-to-government agreements that are expected to come in to help Sri Lanka’s economic conditions.

Cabraal added that Sri Lanka’s tourism industry is also expected to be revived by this December.