Wednesday, September 16 2026
Wednesday, September 16 2026
MONETABRIEF - Sri Lanka's Appropriation Bill, which is the first step of preparing a budget for 2027 was approved by the cabinet for publication in the government gazette and presenting to parliament, spokesman Nalinda Jayatissa said.
The Appropriation Bill sets out budget allocations for each ministry for 2027 and provisions for debt repayments and forms the legal basis for the budget.
Tabling of budget in parliament is considered the First Reading of the budget.
The formal budget presentation which presents tax measures - if any – follows, usually in November.
Sri Lanka has to present a budget in line with the International Monetary Fund program in November.
An IMF team in Sri Lanka is currently in the country for discussions and also for annual Article IV consulations.
Sri Lanka usually goes to the IMF after the central bank cuts rates and prints money to keep rates down, triggering balance of payments trouble.
But this time, serial currency crises from flexible inflation targeting (targeting a domestic anchor without a floating exchange rate) and printing money to boost growth (close an output gap) led to external sovereign default.
From 2015, Sri Lanka printed money to for mid-corridor targeting, after getting IMF technical assistance to calculate potential output.
Rates were cut, rejecting classical economics (Hume's price specie flow mechanism which was later called monetary approach to the balance of payments or Mundell-Fleming Model), triggering serial currency crises.
As output shocks followed each cycle of rate cuts, inflation and output shock followed one after the other and the currency collapsed steadily, the so-called 'potential output' also shrank.
When forex shortages emerged, making it difficult to repay debt, macro-economists then borrowed heavily and persuaded political authorities to borrow excessively above the budgetary needs through an Active Liability Management law.
Even more aggressive 'policy support' by macro-economists, from 2019 led to a sovereign default. (Colombo/Sept15/2026)
| 3 month bill | 9.22% | 22bp ▼ |
| 12-m bill | 9.91% | 10bp ▼ |
| Gold (Ounce) | $4602 | - - |
Comments
Be the first person to comment and join the debate