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Tuesday, October 6 2026
Tuesday, October 6 2026
MACRO POLICY : By 'caliberating' macro-economic policy using rate cuts, SRR cuts and tax cuts, macroeconomists triggered the worst currency crisis in Sri Lanka's central bank history driving poverty to above 20-pct in 2023
MONETABRIEF – Sri Lanka's poverty is projected to fall to 15.8 percent in 2026, down from the 16.9, a year earlier, the World Bank said, releasing a new Development Update document.
The number is still higher than 11.5 percent in 2019, before an currency crisis hit the country with a steep currency collapse from rate cuts.
Sri Lanka's currency collapsed to 340 in 2022, from 184 to the US dollar, driving up inflation to 70 percent in a year and poverty to 20.7 percent in 2023, after the central bank engaged in aggressive 'policy support' (rate and SRR cut) to target 'potential output' backed up by tax cuts (stimulus).
The International Monetary Fund gave assistance to calculate the number and money was printed under cover of a 5 percent inflation target, blowing the balance of payments apart.
Rates are then hiked after the currency collapses.
"Real wages remain about 12 percent below 2019 levels, and labor force participation is about 3 percentage points lower," the World Bank said.
"Persistently high rates of child stunting point to lasting effects of the crisis on the most vulnerable."
The rupee also collapsed in 2026, and inflation has shot up to 8 percent, above the central bank's controversial 7 percent target, just as some people are emerging out of and wages were recovering.
Rates were hiked suddenly in May 2026.
The macro-economists have also won powers to keep inflation at high levels for the next three years defeating attempts (Colombo/Oct06/2026)
| 3 month bill | 9.25% | 5bp ▲ |
| 12-m bill | 9.95% | 2bp ▲ |
| Gold (Ounce) | $4602 | - - |
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