FVMP Debt a New Record of Rs 2.79T

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The Government of Sri Lanka’s (GoSL’s) demand pull inflationary face value money printing (FVMP) debt increased by Rs 6,107 million, thereby on the whole increasing GoSL’s FVMP debt by 0.22 per cent to a new record of Rs 2,787,357.34 million (Rs 2.7874 trillion) yesterday, beating the previous highest MP record of Rs 2.7422 trillion established on the previous day, Wednesday, due to a persistent lack of revenue.

Liquidity was uplifted by Rs 111,450 million (US$ 327.34 million), led by foreign reserves neutral transactions between the GoSL and Central Bank of Sri Lanka’s (CBSL’s) Tuesday’s administered benchmark ‘spot’ value of Rs 340.47 to the US dollar. CBSL lacks transparency in its ‘open market operations’.

GoSL’s at least theoretical MP borrowing costs (BCs) increased by 0.44 per cent (Rs 562.37 million) to Rs 127,043.79 million yesterday due to selling pressure of Treasury (T) Bills and T Bonds in secondary market trading because of sustained uncertainty.

Money market was short for a record consecutive 156 market days to  yesterday, though this shortfall fell by 13.86 per cent (Rs 117,557 million) to Rs 730,730 million, nonetheless causing almost perennial rate pressure, CBSL data showed.

GoSL’s FVMP debt has been over two trillion rupees for a record consecutive 66 market days to yesterday. GoSL’s highest to the 160th highest FVMP debt has been registered in the 160 consecutive market days to yesterday, though not necessarily in a particular order. 

CBSL holds exclusive MP rights.  GoSL’s FVMP debt is equivalent to the FV holdings of CBSL’s T Bills and T Bonds. Investments in T Bills and T Bonds are risk free, because, if GoSL is unable to honour such debt repayments, CBSL is mandated to print demand pull inflationary money and repay such creditors.

 GoSL sells T Bills and T Bonds to raise money domestically to meet its monetary needs. MPBCs are prorated to yields fetched in secondary market trading of T Bonds and T Bills. ‘Spot’ trades are settled after two market days from the date of transaction. CBSL, the steward of the country’s foreign reserves, deals in ‘spot’.

By Paneetha Ameresekere