Money Printing hits new record of Rs 2.85 Trillion

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Government of Sri Lanka’s (GoSL’s) face value money printing (FVMP) debt increased by Rs 86,754.74 million (3.14 per cent), Friday (13 May) over the immediately preceding  day, Thursday, to a record high Rs 2,848,834.11 million (Rs 2.8488 trillion) due to a sustained lack of revenue, Central Bank of Sri Lanka (CBSL) data showed.

However, this increase was non-demand pull inflationary causing as it was used to meet GoSL’s external commitments. The previous MP record of Rs 2.77 trillion was established on Wednesday
(11 May).

Meanwhile, GoSL’s MP borrowing costs (BCs) increased by Rs 11,682.23 million (9.31 per cent) to Rs 137,221.03 million on Friday. This was due to selling pressure of Treasury (T) Bills and T Bonds in secondary market trading on Friday to reinvest in tomorrow’s (18 May) Rs 90 billion T Bill auction with expectations of better returns due to over 20 per cent inflation.

Market’s net shortfall increased by Rs 20,561 million (2.98 per cent) to Rs 711,557 million on Friday, while, led by settlement of transactions between GoSL and CBSL and/or CBSL and the market, liquidity was drained by Rs 107,315.74 million (US$ 294.21 million) on the same day. Conversions are based on the administered benchmark ‘spot’ value of Rs 364.76 as at Wednesday. CBSL lacks transparency in its open market operations. Transactions between CBSL and GoSL are foreign reserves neutral.

GoSL’s FVMP debt has been over Rs two trillion for a record 75 market days to Friday. The market has been short for a record 165 days to Friday. GoSL’s highest to the 169th highest FVMP debt has been registered for a record 169 market days to Friday. GoSL’s FVMP debt is equivalent to the totality of CBSL’s T Bill and T Bond holdings. MP is the exclusive right of CBSL.  GoSL’s MPBCs are prorated to the results in secondary market trading of T Bills and T Bonds in the reference day.

By Paneetha Ameresekere