Sri Lanka national inflation gallops to 58.9-pct to June 2022
Source：The EconomyNext
From：Taipei World Trade Center Liaison Office In Colombo
Update Time：2022/07/28
Sri Lanka’s nation-wide inflation rose 58.9 percent in the 12-months to June 2022 the worst so far in the history of the island’s Latin America style central bank, with unrestrained monetary policy slamming into a non-credible soft-peg now called a flexible exchange rate.
Sri Lanka began printing money despite having a peg around August 2019 under flexible inflation targeting with stimulus (output gap targeting) and sharply ratcheted up inflationary policy from February 2020 under so-called modern monetary theory.
After two years of money printing the non-credible soft-peg collapsed to around 360 to the US dollar to 200 after March 2022 in a failed attempt to float with a surrender requirement (forced dollars sales to the central bank).
In June the NCPI index grew 10.9 percent to 231.5 points after rising 9.7 percent in May and 10.2 percent in April.
The food sub-index had risen 75.8 percent over the past 12 months.
The food index is up 93.6 percent since February 2020 when full blown ‘Modern Monetary Theory’ style money printing began.
The food index is up 118.7 percent since inflationary policy inder flexible inflation targeting began with outright purchases of bonds for yield curve targeting.
Sri Lanka has been engaging in call money rate targeting (printing money overnight and term repos), yield curve targeting (outright purchases of bonds jettisoning a bills only policy), crippling bond auctions through yield controls to control interest rates and trigger external instability since 2015.
The money was printed to control interest rates for stimulus after the International Monetary Fund taught the central bank to calculate an output gap.
After three currency crises and ratcheting up of foreign debt under each crises, Sri Lanka defaulted in April 2022 after running out of reserves and the country is now under a Latin America style inflationary blow-off
There have been calls to tame the soft-pegged central bank’s domestic operations (issue department) so that it cannot engage in contradictory money and exchange policy under flexible inflation targeting and trigger forex shortage and balance of payments crises. (Colombo/ July23/2022)
Source: https://economynext.com/sri-lanka-national-inflation-gallops-to-58-9-pct-to-june-2022-97766/