Thursday, September 10 2026
Thursday, September 10 2026
UNANCHORED : Sri Lanka had the same inflation and interest rates as the US until the IMF's Second Amendment allowed the central bank to debase money and escape accountability
MONETABRIEF – Sri Lanka is reducing its dependence on Treasury bills and going more for bonds, Deputy Minister of Finance Anil Jayantha said, while other types of bonds are options that are under consideration.
"It is now the government's objective to move towards bonds," Minister Fernando said in a interview.
"The proportion of the bills would be reduced."
There could be other options including floating rate bonds and inflation indexed, asset backed and green bonds.
"They are being discussed but these things have not been finalized," he said.
Sri Lanka has high nominal interest rates due to monetary debasement.
In Sri Lanka there is a lot of capital at the short end of the yield curve. The country's interest rates see-saw wildly when the central bank cuts rates, dishonor notes triggering crisesm panic in forex markets and capital flight.
Sri Lanka's nominal interest rates started to soar in the 1980s after the International Monetary Fund's second amendment to its articles allowed central bank's to escape accountability for monetary debasement (competitive exchange rate).
Currency depreciation (competitive exchange rate/beggar thy neighbour) was a doctrine that hit the world in the 1930s after the Fed invented the policy rate but attempts were made to have stable money after World War II with the Bretton Woods.
The attempt to have sound money failed with the "full employment policies" and the Bretton Woods collapsed in 1971.
Before the central bank was set up Sri Lanka raised 20 year loans without much problem and due to lack of deliberately fired credit cycles by central banks mark-to-market losses were not a problem.
Nominal interest rates and real interest rates were also the same, due to lack of inflation under superior specie standard. (Colombo/Sept10/2026)
| 3 month bill | 9.22% | 22bp ▼ |
| 12-m bill | 9.91% | 10bp ▼ |
| Gold (Ounce) | $4602 | - - |
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