Question:
The Central Bank Act No. 16 of 2023 in Sri Lanka introduced a provision to:
(1) Allow unlimited money printing to fund the budget deficit.
(2) Prohibit the Central Bank from purchasing government securities in the primary market.
(3) Fix the exchange rate permanently against the USD.
(4) Abolish the Monetary Board.
(5) Remove the inflation targeting framework.
Correct Answer:
(2)
Answer Explanation:
A key reform in the 2023 Act was to stop “monetary financing” (printing money for the government). It forbids the Central Bank from buying Treasury bills directly from the government (primary market), forcing fiscal discipline.
Topic: Money and Banking Year: 2024
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