lanka
Sri Lanka seeks to shine as tourist wedding destination
ECONOMYNEXT – Sri Lanka’s tourist industry, designers and wedding services providers are teaming up to promote destination weddings in the island as tourism revives from the shock of a Coronavirus pandemic.
“We have already made a name as a wedding destination in many markets such as European, Asian and even the middle east,” Kimarli Fernando, Chairperson of Sri Lanka Tourism Development told reporters.
“We as an industry need to work to together to build relationships with our peers perhaps in India, Nepal, Maldives and Pakistan and promote weddings.”
Before the Coronavirus crisis Sri Lanka’s hotels has seen modest weddings by young Western couples and large parties thrown by parents of Indian couples where entire floors of hotels were hired for days at a time.
Fernando says Sri Lanka has a lot of potential in wedding segment and a variety of places where weddings can take place – near Singharaja forest, cultural triangle, on beaches and in Yachts.
Therefore, the authority is gearing to open a separate wedding portal for this purpose that would include all the necessary businesses to host a wedding in the country.
“Sri Lanka Tourism will open a separate wedding tourism portal to promote weddings for everybody,” Fernando said.
“We will provide the event management companies, wedding planners, photographers and, so that anybody could look at it and reach out to the relevant businesses.
“Sri Lanka is everything that Asia has to offer.”
SLTDA in partnership, with Brides of Sri Lanka, a bridal magazine, Galle Face Hotels and SriLankan Airlines is hosting a two day wedding exhibition on February 19 and 20 to promote the idea.
‘Wedding Week 2022; will be a free of charge exhibition that will have Indian and Maldivian fashion designers presenting along with local designers as well as support services.
“Weddings is one of the significantsegment for the hotel and a significant revenue stream for Colombo and Sri Lanka,” Daniel Grua, General Manager of Galle Face Hotel, Sri Lanka said.
“And Sri Lanka is one of the most sought after destinations in the world for the beauty and hospitality it offers.”
Grua said Sri Lanka’s industry is earns roughly 150 to 200 million dollars annually while supporting 130,000 jobs according to some estimates.
He also said that at least 25 percent of the weddings overall are destination based accounting for 25.1 billion dollars annually.
Sri Lanka is targeting 1.1 million tourist this year.
Fernando said they are getting the month and daily numbers to achieve the targets.
Last month, on average per day Sri Lankahas received 3500 tourist.
She said in 2018 they received about 6000 arrivals per day and their target is to get 50 percent of that.
“There is a worry about the infections, but we are confident on Sri Lankas vaccination drive with the on-going booster,” Fernando added.
“More importantly Wedding tourism and mice is two areas we are focusing on.”
(Colombo/Feb08/2022)
Sri Lanka shares fall to near 6-week low on new tax...
ECONOMYNEXT – Sri Lanka’s stock market slipped on Tuesday (08) to its lowest in 2022 on a government proposal to impose a 25 percent surcharge on groups, companies and partnerships amid concerns over a looming economic crisis, brokers said.
Sri Lanka will charge a 25 percent windfall tax in the style of a ‘super gains tax’ started by the last administration on groups of companies, companies, partnerships and individuals earning over 2.0 billion rupees, according to a draft law gazetted.
The main All Share Price Index (ASPI) fell 1.97 percent or 249.22 points to close at 12,382.69 points, its lowest since December 31.
“The market, in general, is going through a correction at the moment. However, today the announcement of the 25 percent surcharge came into play,” a top market analyst said.
“Even though this was priced in before, the surcharge applicable for the group came as a surprise to the investors. This has got people thinking about corporate profits and so on.”
Large caps like Expolanka and LOLC have dragged the index down in the past few days.
“Even before the earnings came, the share prices shot up with the anticipation of good earnings so now share prices are adjusting down. Fundamentally nothing has changed. The big thing everyone was expecting from Expo was the earnings so now that it is out, investors have nothing new to expect,” the analyst added.
“Now the question investors have in mind is how sustainable are these earnings going to be because of the forex crisis most companies are going through.”
S&P SL20 of the more liquid index fell 2.61 percent or 111.52 points to 4,165.60.
There are also predictions of the central bank allowing the market interest rates to rise to defend the currency and curb inflation.
Foreign investors, who are highly worried about possible sharp depreciation or devaluation in the currency, bucked the trend and bought a net of 59.4 million rupees. The foreign sales so far this year has been 3.4 billion rupees. In 2021, the Sri Lanka stock market suffered a net foreign outflow of 50 billion rupees.
Analysts had predicted that the economic concerns would drag the market from time to time until the government finds a sustainable solution for the country’s looming debt crisis.
The island nation’s foreign reserves fell 25 percent to 2.36 billion US dollars by end January, the central bank’s latest data showed. That reserves include a 1.5 billion US dollar swap from China and 400 million US dollar swap from India.
The island nation repaid a 500 million US dollar loan on January 18 to avoid a sovereign debt default, but persisting forex shortage has weighed on the country’s oil imports and led to power cuts. The government is struggling to avoid continuous power cuts amid announced and unannounced power cuts across the country.
The day’s turnover was 5.4 billion rupees, less than this year’s daily average of 7.7 billion rupees. And a two-week low.
Analysts said investors are worried about possible currency depreciation, the government’s ability to avert a sovereign debt default, and fuel shortages hitting factory manufacturing and thus hitting future earnings.
Expolanka, LOLC Holdings and Royal Ceramics Lanka dragged the index down on Tuesday.
Expolanka, the market heavyweight which has export and freight businesses, lost 5.36 percent to close at 317.75 rupees. The firm reported a staggering four-fold earning of 23 billion rupees in the December 2021 quarter compared to a year earlier, pushed by higher freight rates and recovery of sales to North American and European markets.
LOLC Holdings slipped 3.71 percent to 1,109.00 rupees a share, while Royal Ceramics fell 5.92 percent to 68.30 rupees a share.(Colombo/Feb08/2022)
Sri Lanka India in ‘strategic partnership’ says FM amid emergency financing
ECONOMYNEXT – Relations between Sri Lanka and India have improved into a strategic partnership from a transactional relationship Foreign Minister G L Pieris as New Delhi is bankrolling the island to the tune of 2.4 billion US dollars amid a balance of payments crisis.
During the visit, Foreign Minister Peiris met with his counterpart Jaishankar and the National Security Advisor of India Shri Ajit Doval. Indian Foreign Secretary Shri Harsh Vardhan Shringla also called on the Foreign Minister.
“The relationship between India and Sri Lanka has evolved from a transactional relationship into a strategic partnership which is increasingly recognized by the people of Sri Lanka that India is a true friend whom Sri Lanka can rely on at all times.
Minister Peiris appreciated the financial assistance that the Government of India has extended to Sri Lanka to the tune of 2.4 billion dollars.
Sri Lanka is in the middle of a severe currency crisis after money was printed to suppress rates in a bid to create a ‘production’ economy backed by import controls.
Minister Pieris had discussed economic cooperation, power and energy cooperation, connectivity and tourism and said a recent agreement on oil tanks in Trincomallee showed closer integration between the two countries.
The prospects for renewable energy cooperation, particularly in wind and solar power sectors were also discussed at the talks.
Sri Lanka stock index falls on economic concerns amid foreign selling
ECONOMYNEXT – Sri Lanka’s stock market closed weaker on Monday (07) dampened by economic woes and a looming debt crisis, brokers said.
The main All Share Price Index (ASPI) fell 1.03 percent or 130.91 points to close at 12,631.69 points.
“Investors expect the central bank will allow the market interest rates to rise to defend the currency and curb inflation,” an analyst said.
“The excess money printing has caused the pressure on the exchange rate and the central bank has to increase the rates if it wants to defend the currency at the current level.”
First Capital Market Research said in a note that the index skid as ambiguous investors resorted to book profits in selected counters over rising uncertainties in the economy.
S&P SL20 of the more liquid index down 1.22 percent or 52.90 points to 4,280.86.
Foreign investors, who are highly worried about possible sharp depreciation or devaluation in the currency, sold a net of 457.1 million rupees. The foreign sales so far this year has been 3.4 billion rupees. In 2021, the Sri Lanka stock market suffered a net foreign outflow of 50 billion rupees.
Analysts had predicted that the economic concerns would drag the market from time to time until the government finds a sustainable solution for the country’s looming debt crisis.
The island nation’s foreign reserves fell 25 percent to 2.36 billion US dollars by end January, the central bank’s latest data showed. That reserves include a 1.5 billion US dollar swap from China and 400 million US dollar swap from India.
The island nation repaid a 500 million US dollar loan on January 18 to avoid a sovereign debt default, but persisting forex shortage has weighed on the country’s oil imports and led to power cuts. The government is struggling to avoid continuous power cuts amid announced and unannounced power cuts across the country.
The day’s turnover was 6 billion rupees, less than this year’s daily average of 7.9 billion rupees. And a two-week low.
Investor sentiment has turned negative amid record-high inflation, depreciation pressure on the rupee, central bank’s excess printing money and the government’s failure to take sustainable action to deal with the debt crisis.
Analysts said investors are worried about possible currency depreciation, the government’s ability to avert a sovereign debt default, and fuel shortages hitting factory manufacturing and thus hitting future earnings.
Expolanka, LOLC Holdings and Browns Investment dragged the index down on Monday.
Expolanka, the market heavyweight which has export and freight businesses, plunged 2.75 percent to close at 335.75 rupees. The firm reported a staggering four-fold earning of 23 billion rupees in the December 2021 quarter compared to a year earlier, pushed by higher freight rates and recovery of sales to North American and European markets.
LOLC Holdings fell down 2.54 percent to 1,151.75 rupees a share, while Browns Investment slipped 3.23 percent to 15.00 rupees a share. (Colombo/Feb07/2022)
Sri Lanka foreign ministry criticised over statement against activist
ECONOMYNEXT – Sri Lanka’s foreign ministry has come under strong criticism over a controversial statement on human rights lawyer Ambika Sathkunanathan for a submission she had made to the European parliament’s sub-committee on the island nation’s human rights situation.
In her submission made on January 27, Satkunanathan, a lawyer and former commissioner of the Human Rights Commission of Sri Lanka (HRCSL), had made a critical assessment of the human rights situation in the country and made recommendations to European Union member states.
The foreign ministry in its statement on Friday said Satkunanathan had made “numerous misleading statements” on the situation of human and labour rights in Sri Lanka and “completely” ignored the progress made by the government on many fronts.
The ministry said it was disappointed by Satkunanathan’s recommendations, one of which the ministry said had been for the EU to use the bloc’s leverage on the Generalised Scheme of Preferences (GSP) plus – an annual trade concession worth over 500 million US dollars – to exert pressure on the government regarding human rights.
The ministry also said the “unfounded allegations about discrimination of ethnic communities in her testimony are reminiscent of LTTE propaganda”.
In a response to the foreign ministry’s statement, a collective of 161 civil society activists said: “The attempt by the foreign ministry to draw an analogy between the independent advocacy of a Tamil activist and researcher with the claims of the LTTE is both unwarranted, mischievous and chilling.”
The ministry statement came days ahead of the 49th session of the United Nations Human Rights Council (UNHRC) in Geneva where Sri Lanka will face the daunting task explaining the steps taken to address alleged past rights violations.
The UN rights body has already started finding facts about the island nation’s human rights record despite President Gotabaya Rajapaksa’s Sri Lanka Podujana Peramuna (SLPP) ruling coalition repeatedly stating that it would not accept such a probe.
Repeal PTA for GSP+?
The UN rights body and the European Union have also asked Sri Lanka to repeal the Prevention of Terrorism Act (PTA), which is alleged to have been used to detain people from minority groups and government critics for months on end without charges.
“Given how the PTA and ICCPR Act have been used in Sri Lanka in the recent past by the State to target critical individuals and members of minority communities, this characterisation is ominous,” the civil society members said in their statement.
The EU has asked Sri Lanka to repeal the PTA pending renewal of GSP Plus later this year. Some diplomats have told EconomyNext that there is a likelihood of Sri Lanka losing the trade concession because it has not fulfilled all 27 international conventions it agreed to for the facility.
The government has said it has taken several measures to amend the PTA until it is replaced with a new anti-terrorism act.
However, rights activists say the government has been trying to “hoodwink” the international community to prevent any action at the upcoming UNHRC session and retain the GSP plus.
Loss of the EU’s trade concession at this juncture would be detrimental for Sri Lanka which is already facing an economic and debt crisis.
“Retaining or losing GSP+ trade privileges is entirely based on the European Union’s assessment of the conduct of the Sri Lankan Government with respect to labour rights, human rights, environmental protection and good governance,” the civil society group said.
“The suggestion that it is human rights advocacy that jeopardises GSP+ trade privileges which are crucial for the Sri Lankan economy is highly disingenuous.”
Intimidation
“We consider the targeting of outspoken members of civil society by a government institution using dangerous insinuations to be a form of intimidation aimed at stifling dissent and freedom of expression,” the group said.
“Statements such as this by the Foreign Ministry, we believe, aim to constrain civil society engagement as an independent interlocutor with the international community on democracy and rights issues, standing up for the rights and protection of affected communities and individuals.”
“We note with deep concern the continuing incidents of harassment of victim-survivors, human rights activists, media workers and civil society organisations by state actors.”
They noted that creating an enabling environment for civil society will require more than mere assertions that civil society is treated as a partner, and the shifting of the NGO Secretariat to a new Ministry. The NGO secretariat now comes under Public Security.
“We remain willing to engage with the government in an honest, principled and constructive dialogue on this, and the other substantive issues raised by Ms. Satkunanathan, which we share and stand-by.”
“However, the targeting of civil society activists in this manner by the Foreign Ministry does not inspire confidence or trust.”
Satkunanathan on Monday (07) responding to the foreign ministry statement said many facts in the statement were found not to be true.
“As a Sri Lankan citizen, it is my right and civic duty to question the actions of elected representatives of this country when such actions lead to the suffering and marginalisation of vulnerable communities and demand accountability,” she said in a statement.
“Only a country that respects this right can be considered truly independent.” (Colombo/Feb07/2022)
Sri Lanka opposition SJB for central bank accountability, reform: Sajith
ECONOMYNEXT – Sri Lanka’s main opposition Samagi Jana Balawegaya stands for reform of the central bank to ensure accountability and transparency as well as independence, its leader Sajith Premadasa said as the agency is in the throes a currency crises after a bout of money printing.
Since its creation in 1950 in the style of a Latin America central bank by a US money doctor, the agency has pushed up the cost of living, triggered currency depreciation and social unrest, creating severe difficulties for elected administrations and de-stabilized their economic programs.
Similar situation takes place in other Latin American nations despite severe fiscal corrections. Such central banks which sterilize the balance of payments drive countries into dollar sovereign default even with budget surplus, as shown in the case of Mexico in 1994.
Sri Lanka however is also hit by an expanding budget deficit now. Rising inflation from two years of money printing has forced the current administration give a ‘relief package’ further pressuring domestic credit and inflation if the handouts are financed by the central bank.
After the end of a 30-year civil war, amid rising monetary activism and discretionary or flexible policy Sri Lanka had hit currency crises in 2011/12, 2015/16, 2018 and a 2020/2021/2022 on is ongoing.
Rules vs Discretion
The SJB stands to “ensure that there is greater transparency, accountability, responsibility as far as the main monetary institution is concerned,” Premadasa told Colombo-based foreign correspondents.
“In our economic team we all agree that we have to put in place legislation to ensure that its independence and autonomy is guaranteed.”
Sri Lanka’s imports are now soaring, inflation is soaring, forex shortages are acute and money is being printed to sterilize interventions and keep rates far below inflation.
When the agency printed money and created forex shortages after 1950, people and businesses have been hit by trade controls, exchange controls and price controls leading to blackmarkets, corruption and loss of respect for rule of law.
Currency depreciation also triggered calls for subsidies. Depreciation and inflation reduces real salaries of public sector officials exposing them for corruption.
Singapore for example saw high levels of malnutrition and public sector corruption as the British returned afer World War II, due to wartime inflation triggered by Japanese ‘Banana money’, which its leaders later said led to a ‘corrosive effect on personal integrity.’
The British Military Administration (BMA) which took over and imposed price controls was dubbed the Black Market Administration. Under Keynesianism the UK also had price controls and rationing.
Singapore however maintained the British style currency board, and now appreciates its currency whenever the US prints money and creates global inflation. (Why Singapore chose a currency board over a central bank)
Razeen Sally, a classical economist, has said while a currency board may not solve all problems (a panacea) in the country, rules over discretion was the way to go.
“What was essentially a pretty strict, rule based regime to limit political and bureaucratic discretion – very roughly equivalent to a fixed and non adjustable peg – was transformed in 1950, thanks to the design the tutelage of John Exter, let’s not forget, under a UNP government with J R Jayawardene as Finance Minister, into discretionary, central banking,” he said in September 2019, just as the agency was buying bonds from past deficits, to end monthly BOP surpluses and start the current cycle of reserve depletion.
“And since then, we’ve had at least some periods where monetary policy with discretion over the rules has reinforced the mistakes of fiscal policy rather than leaning against it as it were.”
“I think that move away from the currency board to discretionary central banking was perhaps one of independent Ceylon’s early birth defects in the light of what’s happened subsequently.”
Related Breaking currency board was early birth defect of independent Sri Lanka: Sally
Others have gone further and called for an orthodox currency board or dollarization to strictly tie the hands of activist central bankers and allowing for free trade and non-inflationary growth.
#SriLanka‘s #Rupee faces crisis after crisis because it operates a flexible #ExchangeRate backed by contradictory money & exchange policies. As I advised President Suharto of #Indonesia in ’98, the only options are to #dollarize or est. a currency board.https://t.co/k0tC8RZtEM
— Steve Hanke (@steve_hanke) September 10, 2019
The China Port City special economic zone has been ‘dollarized’ (mutliple currency area) protecting it from the Monetary Board and domestic money printing.
Flexible Policy
In the last ‘Yahapalana’ administration in which Premadasa was a minister, the central bank printed large volumes of money through multiple means to artificially control short and long-term interest rates and busted the currency from 131 to 182 to through two currency crises.
Inflation spiked and growth collapsed after each money printing bout and the administration became unpopular.
The central bank found new and innovative ways of injecting liquidity to control interest rates and de-stabilize the external sector during the last Yahapalana administration as growing public opposition to the naked purchase of Treasury bills, reduced its ability to cripple Treasuries auctions.
In 2015 large volumes of money was released by terminating term repo deals and then Treasury bills were bought, through term and overnight reverse repo auctions to suppress rates as budget deficits and private credit expanded in an exercise that began around the third quarter of 2014.
The external sector started to stabilize after then Governor Arjuna Mahendra suddenly ordered the head of domestic operations to halt money printing in March 2016 after the rupee fell to 145 from 131.
“On or about 03rd March 2016, Mr. Mahendran had telephoned Mr. Rodrigo (head of domestic operations) and instructed him, that the conduct of Reverse REPO Auctions should be immediately stopped, so as to stop the injection of liquidity into the market through Open Market Operations. “In this connection, Mr. Rodrigo said that the “Governor telephoned me in the morning, and said to immediately stop conducting of reverse REPO Auctions.”, according to report of of Presidential Commission into securities fraud.
The crisis stopped at 151 to the US dollar.
After stabilizing the external sector with non-contradictory policy 2017 and sell-downs of Treasury bills held by the agency (deflationary policy) the central bank again printed money to suppress rates and created another currency crisis in 2018.
In 2015 the fiscal authorities raised state salaries and gave subsidies, contributing to high domestic credit growth and interest rates which were suppressed by the central bank with printed money, blowing the pegged exchange rate and balance of payments apart.
Politically Difficult Fiscal Fixes
However in 2018 after Finance Minister Mangala Samaraweera and State Minister Eran Wickremaratne was appointed, central bank independence was publicly defended.
Politically difficult tax hikes which reduced the deficit and a price formula for fuel also removed any de facto fiscal dominance from state linked credit.
However money was again injected from around the end of the first quarter of 2018 and rates were cut in April – a month in which credit demand spikes due to state salary advances requiring higher rates- and printed money through multiple means to keep rates below the lowered policy ceiling by generating excess liquidity.
Money was also printed through a so-called ‘buffer strategy’ where maturing bonds from past deficits were not rolled over as paper harmlessly, but was repaid from bank overdrafts re-financed with central bank window money expanding reserve money.
The legality of the operation has not been questioned in court.
Money was also injected through overnight and term repo auctions. After the currency collaped and stabilized at a little over 160 the central bank again started printing money around July 2018 including through the creation money against Hambantota port dollar lease sale proceeds (rupee generating swaps) held as a Treasury reserve.
Predictably Sri Lanka missed a reserve target under an IMF program, the currency fell, inflation spiked and growth collapsed in a classic second ‘stop-go’ cycle for the second time. (Sri Lanka to miss IMF forex reserve target; seek waiver)
Foreign borrowings also spiked as foreign shortages made it difficult to repay maturing debt with current inflows, despite the politically difficult fiscal corrections made by the political establishment.
During the last administration money was also printed through outright purchases of bonds at various points along the yield curve jettisoning a ‘bills only policy’ put in place by prudent central bankers in the past.
The agency had also done an ‘operation twist’ style exercises (buying long term bonds with printed money and selling short term) to manipulate the gilt yield curve and generate instability by altering rupee reserves of individual banks after the end of a 30-year war, analysts have shown.
Financial Repression
In addition to expanding reserve money through liquidity injections the central bank also engaged in other naked acts of financial repression at broader money supply levels, including suppressing interest paid to small savers in banks as inflation spiked after the currency collapse.
Other tools such as ‘Stage III’ force sales of bonds at controlled rates were also bought into to buckle Treasuries auctions amid rising credit demand.
All the actions were done while operating a ‘flexible inflation targeting’ framework (a discretionary domestic anchor) with a ‘flexible exchange rate (a discretionary external anchor) which were in conflict with each other, naturally leading to currency trouble.
Under flexible exchange rate the rupee was depreciated to target a Real Effective Exchange Rate Index ( de facto inflationary external anchor) including in 2017, when deflationary policy was followed (no money was printed) and billions of dollars of foreign reserves were collected.
As money was printed and the BOP gave way trade restrictions were slapped and ammunition was given to import-substitution cronies and anti-free traders to ratchet up their rhetoric and exploit poor consumers.
The then administration’s free trade agenda was also discredited. Similar situations had encountered administrations in the past, that wanted to open trade, including a 1965 administration which brought the Import and Export Controls Act in 1969.
Monetary Activism
Unlike the current administration which pursued an active strategy of money printing on the style of Modern Monetary Theory (an extreme form of output gap targeting), it was not the case in the last administration after Samaraweera became Finance Minister.
In 2018 as large volumes of money was injected to generate excess liquidity and target call rates the middle of the corridor State Minister Harsha de Silva publicly requested the central bank to reduce money printing, even if policy rates themselves were not raised.
“As you now see, overnight call money rates have almost hit the ceiling at 8.5 percent,” de Silva told a public forum at the time. “If it is hitting the ceiling and you’re not injecting money at below 8.5 percent, then it’s alright and there’s no need currently to increase your policy rates.
“But at least let the overnight rates be within the higher margin of the policy rate. It’s prudent.
“Of course it’s going to have a negative impact on growth, but that is what we have to give to have some sort of stability on the exchange rate.”
Allowing rates to hit the ceiling creates a liquidity short, requiring only the minimum amount of money to be printed, unlike the large volumes of excess liquidity needed to maintain a rate below the ceiling under call money rate targeting.
At the beginning of 2021 the central bank was creating 200 billion rupees of excess liquidity to target call money rates below the ceiling even as reserves were being steadily lost compared to 60 billion rupees in the 2018 liquidity assault.
Corrupted Monetary Anchor
It is rare for ruling party politicians in Asia to plead with a central bank to tighten monetary policy, though in the US Congress, some senators have taken money printing Fed Chairmen who triggered bubbles to task.
However de Silva was ignored.
Politicians as legislators however have the legislative power to reduce the discretion of central bankers to print money and de-stabilize the external sector, by removing specific sections in the monetary law, under which authority is claimed for discretionary policy.
However most of the results of the liquidity operations, run contrary to Section 05 (a) of the monetary law, which requires the agency to maintain “economic and price stability”.
The legality of ‘flexible inflation targeting’ and ‘flexible exchange rate’ has not yet been questioned in court, though top economist W A Wijewardena had pointed out that creating excess demand to target output gaps is not the intention of the monetary law.
The central bank in 2018 sought to legalize highly discretionary policy including the inconsistent ‘flexible exchange rate’ through a new monetary law and also indemnify its officers. The law had not been passed.
There have been growing calls to abolish the central bank in favour of an East Asia style currency board to enable free trade and eliminate currency trouble or at least bring laws to limit the discretion given to trigger happy central banker to control rates.
The earlier currency board which was abolished in 1950, had kept the Sri Lanka and the rupee stable during two World Wars and Great Depression (other than when the gold silver parity changed), while the Latin American style peg creates external trouble each time the Fed tightens policy as well as in the run-up, when commodity prices zoom up.
Tying the hands of activist central bankers also provides a hard budget constraint, in addition to bringing monetary stability, low inflation and social harmony and eliminates strikes as they did in Germany and Japan even as Western output targeting countries were mired in social unrest before 1980.
Analysts say unless curbing central bank activism is made a cornerstone of reform as was done by Singapore, China (separation of PBoC re-finance units into commercial banks in 1978 and more radical reform after 1987 debacle), Vietnam (separation of re-finance into commercial banks economic implosion after 1986 opening and progressive reform of peg) no economic program or free trade, will survive. (Colombo/Feb07/2022)
