Inflationary money printing up Rs 10.7B

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BY Paneetha Ameresekere

Government of Sri Lanka’s (GoSL) face value money printing (FVMP) debt increased by 1.16 per cent (Rs 28,634.05 million) to a new  record of Rs 2,494,741.48 million (Rs 2.4947 trillion) yesterday due to a persistent lack of revenue.

Of this increase, Rs 10,718 million (Rs. 10.72 billion) was demand pull inflationary as it was used to meet  a domestic commitment, while the balance was non-demand pull inflationary as it was used to meet an external commitment. 

GoSL’s highest to the tenth highest FVMP debt has been recorded in the ten consecutive market days to yesterday, vis-à-vis Rs 2.4947 trillion yesterday, Rs 2.4700 on 23 March, Rs 2.4661 trillion on 25 March, Rs 2.448 trillion on 24 March, Rs 2.4070 trillion on 22 March, Rs 2.3967 trillion on 21 March, Rs 2.3888 trillion on 18 March, Rs 2.3724 trillion on 16 March, Rs 2.3375 trillion on 15 March and Rs 2.3333 trillion on 14 March, respectively. 17 March was a Poya holiday.

 Further, GoSL’s FVMP debt has been over Rs two trillion for a record consecutive 46 market days to yesterday.  Also, GoSL’s highest to the 140th highest FVMP debt has been registered in the 140 consecutive market days to yesterday, though not necessarily in a particular order.

Consequently the country’s foreign reserves were poorer by US$  63.99 million (Rs 17,916.05 million) led by the settlements of Government of Sri Lanka’s (GoSL’s) foreign debt servicing commitments and the import of ‘essential’ items yesterday  at the administered and discounted ‘spot’ price of Rs 280 to the dollar. 

Meanwhile, GoSL’s at least theoretical MP borrowing costs (MPBCs) decreased by 0.17 per cent (Rs 121.1 million) to Rs 71,825.37 million yesterday due to secondary market buying pressure of riskless, but low returns Treasury (T) Bills and T Bonds in secondary market trading, rather than invest in the lucrative private sector due to persistent uncertainty.

Money market was short for  a record consecutive 136 market days to yesterday, though this shortfallfell  by  1.62 per cent (Rs 10,718 million) to Rs 649,9320 million, nonetheless   causing  almost perennial rate pressure. 

 CBSL, the steward of GoSL’s foreign reserves and debt, holds exclusive MP rights.‘Spot’ trades are settled after two market days from the date of transactions CBSL deals in “spot.”

GoSL’s foreign debt servicing commitments and “essential” imports are met from the country’s foreign reserves because if met from the market, that would cause further depreciative pressure on the rupee. GoSL’s FVMP debt is equivalent to the FV holdings of CBSL’s T Bills and T Bonds. GoSL’s MPBCs are prorated to secondary market trading of T Bills and T Bonds.