The cover story of The Economist says that America’s Central Bank has made a big mistake. The Federal Reserve has suffered a hair-raising loss of control, with consumer prices 8.5% higher than a year earlier, the fastest annual rise since 1981.
America has released oil from its Strategic Petroleum Reserves – reserves which smaller economies such as ours do not have the capacity to hold and thus, are exposed to the cyclicality of oil prices, whether driven by monopoly pricing of producer or other cartels, or wars readily fought by nations – a luxury we do not enjoy.
The US experienced the worst overheating in a big and rich economy, in the 30-year era of inflation targeting central banks, and its pandemic stimulus of 25% of GDP (gross domestic product), is the highest in the rich world.
Sri Lanka
At home, we are experiencing multiple crises, with irrational, perhaps even reckless vote-getting fiscal/taxation strategies; inherited but part self-inflicted, dollar denominated debt burdens; imprudent exchange rate management; loss of control over runaway inflation; a two-year-long pandemic – a challenge to any Government or Central Bank anywhere.
The Governor of our Central Bank, the Finance Minister, and a team of economists are presently in negotiations with the International Monetary Fund (IMF). Having interacted with many Resident Representatives of the IMF such as Nadeem Ul Haque, Jeremy Carter, and Koshy Mathai over a 25-year period, and having interviewed their predecessors on national television even before, I’ve seen the evolution of the thinking, accomodation, intervention, and arrangements of the IMF.
While on assignment for the Asian Development Bank (ADB) in countries such as Armenia, Kyrgyzstan, and Azerbaijan, as well as having seen how the IMF has accommodated countries such as Mexico, Brazil, and Argentina – which I have visited and continue to observe the progress of – I believe that Sri Lanka has considerable potential to emerge out of its current quagmire, even if part self-inflicted.
Against that background, I was happy to see the IMF press release last Saturday (23), particularly the words: “...the importance of stronger social safety nets, to mitigate adverse impact, of the current economic crisis, on the poor and vulnerable.”
I like to see creativity driven by sensitivity on the part of the IMF, and a realisation on the part of our political leaders of all colours, and key public officials at regulatory and supervisory institutions whose abuses, excesses, and recklessness must necessarily be replaced with honesty, integrity, independence, objectivity, discipline, and accountability.
As a Sri Lankan, for whom this country is an only home, with no intention to adopt any other home anywhere, I have an expectation that better sense must prevail on all fronts and soon, whether through structural, extended, emergency, or rapid financing instruments.
(The writer is an Independent International Consultant with the Financial Conduct Authority [FCA], and holds an MBA from the University of Pittsburgh, Pennsylvania, USA)
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The views and opinions expressed in this article are those of the author, and do not necessarily reflect those of this publication.
Economic lessons from the US for small nations like Sri Lanka
24 Apr 2022
Economic lessons from the US for small nations like Sri Lanka
24 Apr 2022
The cover story of The Economist says that America’s Central Bank has made a big mistake. The Federal Reserve has suffered a hair-raising loss of control, with consumer prices 8.5% higher than a year earlier, the fastest annual rise since 1981.
America has released oil from its Strategic Petroleum Reserves – reserves which smaller economies such as ours do not have the capacity to hold and thus, are exposed to the cyclicality of oil prices, whether driven by monopoly pricing of producer or other cartels, or wars readily fought by nations – a luxury we do not enjoy.
The US experienced the worst overheating in a big and rich economy, in the 30-year era of inflation targeting central banks, and its pandemic stimulus of 25% of GDP (gross domestic product), is the highest in the rich world.
Sri Lanka
At home, we are experiencing multiple crises, with irrational, perhaps even reckless vote-getting fiscal/taxation strategies; inherited but part self-inflicted, dollar denominated debt burdens; imprudent exchange rate management; loss of control over runaway inflation; a two-year-long pandemic – a challenge to any Government or Central Bank anywhere.
The Governor of our Central Bank, the Finance Minister, and a team of economists are presently in negotiations with the International Monetary Fund (IMF). Having interacted with many Resident Representatives of the IMF such as Nadeem Ul Haque, Jeremy Carter, and Koshy Mathai over a 25-year period, and having interviewed their predecessors on national television even before, I’ve seen the evolution of the thinking, accomodation, intervention, and arrangements of the IMF.
While on assignment for the Asian Development Bank (ADB) in countries such as Armenia, Kyrgyzstan, and Azerbaijan, as well as having seen how the IMF has accommodated countries such as Mexico, Brazil, and Argentina – which I have visited and continue to observe the progress of – I believe that Sri Lanka has considerable potential to emerge out of its current quagmire, even if part self-inflicted.
Against that background, I was happy to see the IMF press release last Saturday (23), particularly the words: “...the importance of stronger social safety nets, to mitigate adverse impact, of the current economic crisis, on the poor and vulnerable.”
I like to see creativity driven by sensitivity on the part of the IMF, and a realisation on the part of our political leaders of all colours, and key public officials at regulatory and supervisory institutions whose abuses, excesses, and recklessness must necessarily be replaced with honesty, integrity, independence, objectivity, discipline, and accountability.
As a Sri Lankan, for whom this country is an only home, with no intention to adopt any other home anywhere, I have an expectation that better sense must prevail on all fronts and soon, whether through structural, extended, emergency, or rapid financing instruments.
(The writer is an Independent International Consultant with the Financial Conduct Authority [FCA], and holds an MBA from the University of Pittsburgh, Pennsylvania, USA)
………
The views and opinions expressed in this article are those of the author, and do not necessarily reflect those of this publication.