CB defends money injection to boost liquidity | Sunday Observer

CB defends money injection to boost liquidity

Putting up a spirited defence on the need to print money, the Central Bank at its last monetary policy media briefing, minced no words in stating that it was the need of the hour to inject money into the system to ensure sufficient liquidity at a time the economy was facing turbulence.

“We undertook the exercise to ensure there was adequate liquidity in the system as the global pandemic had a crippling effect on the economy,” Senior Deputy Governor of the Central Bank, Dr. Nandalal Weerasinghe said.

Justifying the need to infuse liquidity to the system, officials of the banking and finance sector regulator said Central Banks across the world print money to ensure there is sufficient liquidity in the market without causing inflationary pressure.

“Had we not printed money there would have been a liquidity crunch in the country aggravating the situation further,” Dr. Weerasinghe said, adding that the Central Bank had instruments in place to manage and absorb excess liquidity.Central Banks print money to ensure currency circulation during crisis times. The US Fed and Central Banks globally inject money into the economy to keep markets under control and provide liquidity.

Former Central Bank Governor Dr. Indrajit Coomaraswamy was a strong proponent of the amendments to the Monetary Law Act which is vital to prevent? governments urging the regulator to print money and ensure independence of the institution.The Central Bank since the outbreak of the pandemic has introduced a host of measures to stimulate the economy such as? concessionary loan schemes and moratoriums to support crisis-hit enterprises.

However, while these benefits have not been passed on to the deserving sectors fully yet, the need to access funds for venture development has been choked due to fears of a second wave of the killer disease.

The Central Bank revised down its initial projections of a 4.0 percent private sector credit growth this year due to low demand for credit. The regulator expected credit to the private sector to grow by around 12-13 percent for the year.

?- LF