Money printing Records 2nd Highest Figure

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Government of Sri Lanka’s (GoSL’s) face value money printing (FVMP) debt increased  for the third consecutive market day to Friday, increasing by 0.68 per cent (Rs 19,298.46 million) to reach its second highest figure of Rs 2,861,691.17 million (Rs 2.8617 trillion) thus far, due to a sustained lack of revenue. This increase was however non-demand pull inflationary as it was used to meet external commitments on Friday (3).

Despite this increase in MP, GoSL’s MP borrowing costs (BC), relative to the acceleration in FVMP debt, decelerated to 0.21 per cent (Rs 250.48 million) to record an increase of Rs 118,115.63 million only, due to sustained buying pressure of riskless, low returns Treasury (T) Bills and T Bonds because of perennial uncertainty, rather than invest in the high returns private sector, the engine of growth.

Market’s net shortfall increased for the  fourth consecutive market day to  Friday, this time by 2.27 per cent (Rs 15,243 million) to Rs 686,640 million, led by a liquidity fall of Rs 34,541.46 million (US$ 95.92 million) during the course of trading caused by the settlement of  paying for ‘essential’ imports after buying US dollars from the country’s foreign reserves. Conversions are based on the administered benchmark ‘spot’ value of Rs 360.11 to the US dollar as at Wednesday.

GoSL’s FVMP debt has been over Rs two trillion for a record 89 consecutive market days to Friday due to an almost perennial lack of revenue. The market has been short for a record 179 market days to Friday. GoSL’s highest to the 183rd highest FVMP debt has been registered for a record 183 market days to Friday. GoSL’s FVMP debt is equivalent to the totality of Central Bank of Sri Lanka’s (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.

By Paneetha Ameresekere