President Wickremesinghe claimed that “money printing” is currently prevented by enacting the Central Bank of Sri Lanka Act No. 16 of 2023 (CBA23). To verify this claim, FactCheck.lk consulted the CBA23 and the repealed Monetary Law Act (Chapter 422).
In a past fact-check, Central Bank (CBSL) Governor Dr. Nandalal Weerasinghe referred to the amount of “money printed” in the country as being equivalent to the change in the amount of “reserve money”. This statement was verified by FactCheck.lk as correct. In popular media and non-technical usage, however, the term “money printing” is often used to refer to the more limited activity of “monetary financing” of the budget. Monetary financing is one part of the technical definition of “money printing” referred to above. It excludes other means of increasing reserve money, such as lending to the private sector and purchasing foreign assets.
To assess the president’s claim, FactCheck.lk interpreted his use of the term “money printing” in its non-technical sense as referring to “monetary financing”.
Sections 86 and 127 of the recent CBA23 constrains the CBSL from monetary financing in three ways:
(1) prohibits extending credit to the government or government-owned entities (with some exceptions for exigent circumstances)
(2) prohibits purchasing government or government-owned entity securities in the primary market (with secondary market purchases constrained not to circumvent this prohibition)
(3) limits providing provisional advances to the government to the first month of the financial year (up to 10% of the previous year’s revenue)
However, a transitional provision (s.128) in CBA23 allows the CBSL to purchase government securities in the primary market for 18 months from the operational date of the CBA23. Nevertheless, a countervailing commitment in the current programme with the IMF limits the CBSL from providing net credit to the government to LKR 2,740 billion by December 2023.
Monetary financing is constrained by (a) prohibitions 1 and 2 by CBA23, (b) the limited advances allowed by CBA23 that were only accessible in January, and (c) the transitional provision in monetary financing being nullified by the CBSL already being at the LKR 2.74 trillion IMF programme limit.
Therefore, the president is correct in asserting that it is not possible to secure any further monetary financing (until January 2024).
Therefore, we classify the above statement as TRUE.
*FactCheck.lk’s verdict is based on the most recent information that is publicly accessible. As with every fact check, if new information becomes available, FactCheck.lk will revisit the assessment.
Central Bank of Sri Lanka Act No. 16 of 2023. (2023). Retrieved November 3, 2023, from https://www.cbsl.gov.lk/sites/default/files/cbslweb_documents/laws/acts/en/central_bank_of_sri_lanka_act_2023_e.pdf
Monetary Law Act (Chapter 422). (2014). Retrieved November 3, 2023, from https://www.cbsl.gov.lk/sites/default/files/cbslweb_documents/laws/acts/en/monetary_law_act.pdf
International Monetary Fund. (2023). Sri Lanka: Request for an Extended Arrangement Under the Extended Fund Facility-Press Release; Staff Report; and Statement by the Executive Director for Sri Lanka; IMF Country Report No. 23/116; March 6, 2023. IMF Staff Country Reports, 2023(116). https://www.imf.org/en/Publications/CR/Issues/2023/03/20/Sri-Lanka-Request-for-an-Extended-Arrangement-Under-the-Extended-Fund-Facility-Press-531191