No More Money Printing to Cover Budget Deficits’ – Central Bank Governor
Sri Lanka will no longer be able to resort to printing money to finance government budget deficits under the new Central Bank Act, Governor Dr. P. Nandalal Weerasinghe has said, stressing that harmful monetary practices of the past will not be repeated.
Addressing the Annual International Conference of the Sri Lanka Economic Association (SLEA) held recently at the Bandaranaike Memorial International Conference Hall in Colombo, the Central Bank Governor said the new legal framework has strengthened institutional independence and discipline, preventing political authorities from using monetary expansion to cover fiscal shortfalls.
Dr. Weerasinghe noted that refraining from money printing would help ensure long-term price stability and safeguard the overall stability of the financial system.
He emphasized that maintaining the current reform agenda and policy consistency is crucial for the country’s economic recovery.
The Governor pointed out that strict monetary and fiscal policies adopted in the wake of the recent economic crisis have helped contain inflation and rebuild foreign exchange reserves. These measures, he said, have laid the foundation for Sri Lanka’s gradual return to positive economic growth after suffering its worst economic downturn.
He also reiterated the importance of properly implementing debt restructuring agreements with external creditors and commitments made to the International Monetary Fund (IMF) in order to ensure long-term debt sustainability.
Dr. Weerasinghe stressed that protecting core economic principles and fiscal discipline, even amid political and social changes, is essential for the country’s future prosperity.
However, he cautioned that the economy has not yet fully recovered. Significant challenges remain in areas such as structural reforms, export promotion, and revenue generation.
Call for Export-Led Growth
Speaking at the same event, President of the Sri Lanka Economic Association, Professor Wijithapura Wimalaratana Thera, underlined the need to boost export earnings in order to achieve sustainable economic prosperity.
“To strengthen the economy, Sri Lanka must increase export income and reduce import expenditure. This will help narrow the balance of payments deficit and reduce the national budget deficit,” he said.
He added that agricultural exports should be modernized through the adoption of new technologies and a shift towards commercial farming. At the same time, the industrial sector must be significantly developed, while the services sector should be upgraded to generate higher income levels.
Professor Wimalaratana Thera also stressed the importance of improving human capital through skills development and accelerating education reforms.
Need for Better Development Coordination
Senior Professor O. G. Dayaratna Banda, Head of the Department of Economics at the University of Peradeniya, highlighted weaknesses in development planning and coordination.
He paid tribute to the late Professor A. D. V. de S. Indraratna, describing him as a giant in Sri Lanka’s economics profession whose guidance helped strengthen the discipline.
Professor Dayaratna Banda said one of the major obstacles to development is the lack of coordination among institutions.
As an example, he noted that newly carpeted roads are often dug up within weeks for water, electricity, or telecommunications projects, leading to repeated damage, wastage of public funds, and delays in development.
“We must ensure that such inefficiencies are eliminated if we are serious about sustainable development,” he said.