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UPFA Govt. ‘creates’ new money worth Rs. 69 billion
Sri Lankan authorities, despite repeated denials by the government including Finance Minister Sarath Amunugama, have injected new money -- in common parlance printed money through the purchase of Treasury Bills – to make up for shortfalls in state revenue.

A joint investigation by The Sunday Times FT and Lanka Business Report (LBR) found that by November 10, the Central Bank had accumulated more than Rs 69.5 billion worth of Treasury Bills, up from just Rs 10 billion in January this year.

However on Friday, Dr Amunugama told LBR that, "When you have this big gap between your revenue and expenditure, then you try to meet the gap by various devices like under utilizing voted expenditure, you increase foreign exchange, and you try to increase revenue."

"You do all those things on the run. When all those things are not sufficient, you have to create money to meet the rest of the gap," he said in an interview, admitting that new money has been created.

The opposition had accused the government of printing money to counter revenue shortfalls, but the government had denied it. The Finance Minister also said Thursday's budget would stimulate economic activity, so that the goods and services in the economy were increased to match the supply. But with a foreign exchange crisis on his hands, Dr Amunugama said he would find it difficult to spur growth.

Economists said the purchase and the sale of treasury securities was a key instrument of controlling money supply in a country. When the Central Bank buys Treasury Bills it releases liquidity into the circulation of money in the country. Likewise, when it sells the Treasury Bills, money is taken out of the system.

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