The Central Bank denies that it is printing money behind the current inflation

Pushing back on the claims that the recent bout of inflation is caused by the unprecedented liquidity injections made into the system, the Central Bank said it had recognised the need to shrink its treasury bill holdings in a methodical manner, without disturbing the price and financial system stability.

 

The holdings of government securities by the Central Bank, which typically represents the printed money stock, started rising exponentially since the onset of the pandemic last year, to provide liquidity to the financial markets and also to finance the budget deficit, when the state revenues significantly declined, due to the pandemic-induced economic restrictions.

 

W.D. Lakshman by providing liquidity support to the government and to the markets to maintain the much-needed economic and financial system stability when the crisis unfolded last year, Cabraal said the measure is nothing unique to Sri Lanka but one adopted by over 120 countries around the world.