GoSL’s FVMP debt rises to Rs 2.83 Trillion

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Government of Sri Lanka’s (GoSL’s) face value money printing (FVMP) debt increased by 1.90 per cent (Rs 52,710 million) to Rs 2,833,394.71 million (Rs 2.8334 trillion) due to a sustained lack of revenue on Wednesday (1). This increase was however non-demand pull inflationary as it was used to meet external commitments on Wednesday.

GoSL’s MP borrowing costs (BCs) decreased by 1.31 per cent (Rs 1,579.49 million) to Rs 118,986.65 million  on Wednesday due to buying pressure of riskless, low returns Treasury (T) Bills and T Bonds due to sustained uncertainty, rather than invest in the high returns private sector, the engine of growth.

Market’s net shortfall increased by nine per cent (Rs 54,878 million) to Rs 664,965 million on Wednesday, led by a liquidity fall of Rs 107,588 million (US$ 298.23 million) during the course of trading caused 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 360.76 to the US dollar as at Monday.

GoSL’s FVMP debt has been over two trillion rupees for a record 87 consecutive market days to Wednesday due to an almost perennial lack of revenue. The market has been short for a record 177 market days to Wednesday. GoSL’s highest to the 181st highest FVMP debt has been registered for a record 181 market days to Wednesday. 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 outcome 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, while ‘essential’ imports are met from the country’s foreign reserves and not from the market to prevent further depreciative pressure on the rupee as Sri Lanka is an import dependent economy. CBSL lacks transparency in its open market operations.  Transactions between CBSL and GoSL are foreign reserves neutral.

By Paneetha Ameresekere