Government of Sri Lanka’s (GoSL’s) face value money printing (FVMP) debt decreased by Rs 43.3 billion (1.52 per cent) to Rs 2.8176 trillion yesterday (23), thereby partially mitigating demand-pull inflationary pressure as well. On the previous market day Friday (20 May), GoSL established a new FVMP debt record of Rs 2.8610 trillion due to a sustained lack of revenue.
GoSL’s MP borrowing costs (BCs) decreased by Rs 5.971 billion (4.43 per cent) to Rs 128.6 billion yesterday. This was due to buying pressure of riskless, but low returns Treasury (T) Bills and T Bonds in secondary market trading yesterday, rather than invest in the high returns private sector, the engine of growth, due to persistent uncertainty.
Market’s net shortfall decreased by Rs 30,048 million (4.44 per cent) to Rs 646,336 million yesterday, aided by a liquidity hike of Rs 73,413.85 million (US$ 204.18 million) during the course of trading on the same day, led by the settlement of transactions between the GoSL and the Central Bank of Sri Lanka (CBSL). Conversions are based on the administered benchmark ‘spot’ value of Rs 359.55 to the US dollar as at Thursday. CBSL lacks transparency in its open market operations.
GoSL’s FVMP debt has been over Rs 2 trillion for a record 80 consecutive market days to yesterday. The market has been short for a record 170 market days to yesterday. GoSL’s highest to the 174th highest FVMP debt has been registered for a record 174 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. ‘Essential’ imports are met from the country’s foreign reserves and not from the market so as to minimise pressure on the rupee, as Sri Lanka is an import-dependent economy.
By Paneetha Ameresekere