• Liquidity (money) injected through OMOs should not be grossly misinterpreted as “money printing”

By Ajith Siriwardana

The Central Bank of Sri Lanka (CBSL) said yesterday that claims on money printing are inaccurate and baseless. It clarified that the liquidity (money) injected through Open Market Operations (OMOs) is a routine central banking function and should not be grossly misinterpreted as “money printing.”

The CBSL said in a statement that there have been recent claims in the media that the Central Bank of Sri Lanka (CBSL) has “printed” Rs. 100 billion on 25 October 2024, through its Open Market Operations.

“It is important to clarify that these claims are not accurate and are baseless. The liquidity (money) injected through OMOs is a routine central banking function aimed at managing adequate liquidity in the banking system for the purpose of stabilising the short-term interest rates in the economy and ensuring price stability, and hence it should not be grossly misinterpreted as “money printing.” “Money printing” generally means issuing new money to the economy and in economic terms, new money issued by a central bank is known as ‘reserve money’ or ‘base money’ the CBSL said in a statement.

“The media reports have misinterpreted the auctions and monetary operations conducted by CBSL as a part of its regular Open Market Operations. There has been no “money printing” or issuance of liquidity to finance the government’s budget by the CBSL. These actions are part of the standard process of monetary operations aimed at achieving the CBSL’s objective of price stability,” the CBSL further said.

Meanwhile, Cabinet spokesman Minister Vijitha Herath said the government had neither printed money nor obtained loans from foreign countries or institutions.

He told the weekly briefing to announce Cabinet decisions that if money has been printed, President Anura Kumara Dissanayake, as the Finance Minister, should have signed the currency notes, adding that no such notes signed by the President have been issued.