Leading world expert on stopping hyperin flation, Steve Hanke took to twitter again to empasise that Sri Lanka was firmly on a hyperinflation spiral.
Sri Lanka now moved up to 6th place in the Hanke’s inflation table, measuring 55% pa as per data on 24th March 2022.
The top economist reiterated that ‘the only way to save Sri Lanka’s crumbling economy’ is to “dump the rupee and install a currency board”.
In this week’s inflation table, #SriLanka is moving up the ranks. On Mar 24, I measured LKA’s inflation at a SKY-HIGH 55%/yr. To crush inflation & save the rupee, Sri Lanka needs to install a #CurrencyBoard, like the one it had from 1884 until 1950. It worked like a charm.
“Today, I measure inflation in Sri Lanka at a roaring 49 percent/yr. Sri Lanka’s currency crisis and recent fuel price hikes are sinking LKA,” said the Johns Hopkins University Professor of Applied Economics in a tweet.
Since January 2022, the Sri Lankan rupee has depreciated by 26 percent against the US dollar, pointed out Hanke. The severe balance of payments crisis and recent fuel price hikes are sinking the country, he said.
According to the Central Bank, the official inflation rate of the country for 2021 was 12.1 percent.
He noted that to ease the crisis, the island nation needs to have in place a currency board, similar to what was there in from 1884 until the 1950s.
A currency board is an extreme form of a pegged exchange rate, where a government would set a specific fixed exchange rate. The establishment of such a board would take away from the Central Bank the management of exchange rate and money supply. The system would not allow governments to print money to pay down deficits.
Currency board regimes are commended for their rule-based nature, and are known to keep inflation under control.