Option 6 of 8
Print more money
Have the central bank create money to pay government bills instead of borrowing or taxing.
In the house
Photocopy banknotes. The bills get paid today, but every note in everyone's wallet buys less tomorrow.
The idea
A central bank can create new money and lend it to the government. This pays the bills without raising taxes or borrowing from the public. It is included here because people often ask about it, and because the Sri Lankan record is part of the story.
How it works
- The central bank creates money and buys government bonds or lends directly.
- The government spends the money or repays debt with it.
- More money chases the same goods, which tends to push prices up.
How long
Fast to do. Effects on prices can follow within months.
Who has to agree
The central bank, and the laws that limit or allow it.
Who feels it first
Everyone who holds rupees, especially savers and people on fixed incomes.
What makes it hard
- Prices rise, and the rupee can fall against other currencies.
- Once people expect it to continue, inflation can speed up.
- Imported goods like fuel and medicine become more costly.
How people and the world may react
Households
Savings and fixed salaries buy less. Rising prices hit poorer households hardest.
Businesses
Planning becomes difficult, and imports cost more.
Lenders and other countries
Lenders and rating agencies generally react negatively. Foreign investors may take money out.
Pros and cons
Pros
- Fast, with no tax rise or visible cut.
- Keeps borrowing costs low for a while.
- Inflation can reduce the real value of debt that has a fixed interest rate.
Cons
- Inflation and a weaker rupee.
- Erodes savings and fixed incomes.
- Lenders are likely to charge more for new loans.
A real example
Sri Lanka, 2022
Colombo consumer price inflation reached 69.8% in September 2022, falling to 66% in October. IMF figures on this site show average inflation of 45.2% in 2022 and real growth of -7.3%. The causes of the 2022 inflation are debated, and the creation of money was one factor reported by analysts.
Sources:
Try it with numbers
The starting settings show this option as a simple example. Change any slider to explore. Open the full calculator, or build a mix of options in Try your strategy.
Inflation of 15%. Lenders usually ask for more interest when prices rise, so the interest rate is set 10 points higher.
Each year, debt as a share of GDP = last year's share × (1 + interest rate) ÷ (1 + growth of GDP in rupees) − primary surplus. Growth in rupees combines real growth and inflation. Debt starts at 96.8% of GDP in 2025 (IMF, general government gross debt). The interest rate is the Central Bank's actual interest paid in 2025 divided by central government debt at the end of 2025. This is a simple illustration with the settings you choose, not a forecast, and it cannot show shocks such as exchange rate moves or new borrowing for other reasons.
These pages describe options and what happened when countries tried them. Budgets LK does not recommend any option, and nothing here is a forecast or financial advice.