Sri Lanka prints money to buy tea in Zimbabwe-style move

Dec 14, 2008 (LBO) - State-run Sri Lanka Tea Board has spent over 200 million rupees to buy tea, using printed money from the Central Bank, in a Zimbabwe-style inflationary quasi-fiscal move, the latest information reveals. Tea Board chairman Lalith Hettiarachchi said last week that it had bought almost a million kilograms of tea worth 232 million rupees with a credit facility provided by state-run Bank of Ceylon via central bank 're-finance'.


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Worst Inflation

Central Bank re-finance is simply printed money, and Sri Lanka had relied on such dangerously de-stabilizing forces to finance rural development programs in the 1980s.

The 1980s saw the worst inflation in the country's history, until April 2008, when consumer inflation in Colombo hit 29.

9 percent. The weights of the index were then changed.

In the 1990s under then central bank governor A S Jayawardene, direct central bank financing of real economic activities was halted and inflation was brought down to single digits.

However such tactics are still widely used in hyper-inflationary countries like Zimbabwe to 'promote' economic activities.

Zimbabwe's hyper-inflation and currency collapse has been blamed on massive money printing to