Government of Sri Lanka’s (GoSL’s) face value money printing (FVMP) debt decreased by Rs 44,871.65 million (1.58 per cent) to Rs 2,803,962.46 million (Rs 2.804 trillion) on 17 May, yet to record its second largest FVMP debt seen thus far.
GoSL’s highest FVMP debt was Rs 2.8488 trillion recorded on 13 May and its previous second highest FVMP debt was a figure of Rs 2.79 trillion established on 10 May. Yesterday’s decrease in FVMP debt also partially helped to mitigate demand pull inflationary pressure.
GoSL’s MP borrowing costs (BCs) decreased by Rs 7,592.54 million (5.53 per cent) to
Rs 129,628.49 million yesterday. This was due to buying pressure of riskless and low returns Treasury (T) Bills and T Bonds in secondary market trading yesterday, rather than lend to the high returns private sector, the engine of growth due to sustained uncertainty.
Market’s net shortfall increased by Rs 7,570 million (1.06 per cent) to Rs 719,127 million yesterday, while, led by settlement of transactions between GoSL and Central Bank of Sri Lanka (CBSL) and/or CBSL and the market, liquidity increased by Rs 37,301.65 million (US$ 103.62 million) during the course of trading on the same day. Conversions are based on the administered benchmark ‘spot’ value of Rs 360 to the US dollar as at Thursday. 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 76 market days to yesterday. The market has been short for a record 166 days to yesterday. GoSL’s highest to the 170th highest FVMP debt has been registered for a record 170 market days to yesterday. 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.
‘Spot’ trades are settled after two market days from the date of transaction. CBSL, the steward of GoSL debt and its foreign reserves deals in ‘spot’. The ‘spot’ is administered to minimise GoSL’s foreign debt in rupee terms, it’s learnt.
BY Paneetha Ameresekere