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Signs of going up the interest rates over 25 percent..?


2022-05-01 7701

 

No other alternative to escape from the inflation

 

Sri Lanka is the third highest in inflation rate in the world

 

Soon Sri Lanka will be in first place

 

The economic and political crisis needs a one-time solution

 

Economists emphasize

 

 

Economists say the interest rates should be increased over 25% to alleviate the country's high inflation and crisis.

The International Monetary Fund (IMF) has stressed the need to tighten monetary policy, further raise interest rates and taxes and adopt flexible exchange rates in order to resolve the acute crisis in Sri Lanka.

In the midst of a volatile and unstable political environment, prices of goods and services, including food, are rising rapidly on a daily basis, and Steve Hank, an Economist at Johns Hopkins University points out that inflation in Sri Lanka is around 119%.

According to his analysis, Zimbabwe has the highest inflation rate in the world at 207% followed by Lebanon at 150% and Sri Lanka at 119%.

Senior Professor of Department of Economics and Statistics, University of Peradeniya, Prasanna Perera expressing views to “lankanewsweek” about the acute economic and political crisis in the country further stated.

 “People of this country are helpless due to the high prices of food items, goods and services in resent Inflation which are going up day by day. 

The acute inflation was faced by the United States of America during the civil war, Germany during World War I, Hungary during World War II, Yugoslavia in the 1980s, and other countries such as Zimbabwe and Lebanon at the present.

If the current economic and political crisis in the country continues, Sri Lanka is likely to become the first country in the world to have the highest inflation rate by the second week of May 2022, overtaking Zimbabwe and Lebanon.

That is why we, as the university community, strongly urge a solution for the economic and political crisis that has engulfed the country should be found at the same time.  Economic stability will not exist as long as there is political instability. We do not even have foreign exchange to import essential food and medicine and our official foreign reserves have shrunk to US $ 250 million.

When look at the monetary policy, it is visible that the country is moving from a low interest rate regime to a high interest rate regime and acts with confidence while allowing the exchange rate to float further.

It has been agreed to cut the state expenses right now under the fiscal policy of the country which denotes that the fiscal policy has been tightened. Accordingly, the government is getting prepared for the conditions of the International Monetary Fund and it should not be surprised if it tries to increase government revenue by raising taxes further in the future. The people should also be responsible for creating such a painful environment in the country and the people should act wisely at least in the future. 

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