Money printing falls to Rs 2.8382 T

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Government of Sri Lanka’s (GoSL’s) face value money printing (FVMP) debt decreased by 0.91 per cent (Rs 25,966 million) to  Rs 2,838,183.41 million (Rs 2.8382 trillion) yesterday, thereby marginally deflating demand pull inflationary pressure as well.

 However, the decrease in GoSL’s MP borrowing costs (BCs) relative to the fall in GoSL’s FVMP debt, accelerated by 1.38 per cent (Rs 1,551.62 million) to Rs 111,254.12 million yesterday due to sustained buying pressure of riskless, low returns Treasury (T) Bills and T Bonds in secondary market trading because of perennial uncertainty, rather than invest in the high returns private sector, the engine of growth. Yesterday was also the second consecutive market day that GoSL’s MPBCs fell for similar reasons.

Market’s net shortfall  decreased by 4.06 per cent (Rs 28,188 million) to Rs 665,890 million, led by a liquidity uplift of Rs 54,154 million (US$ 150.30 million) during the course of trading dominated by transactions between the GoSL and the Central Bank of Sri Lanka (CBSL). Conversions are based on the administered benchmark ‘spot’ value of Rs 360.30 to the US dollar as at Friday.

GoSL’s FVMP debt has been over Rs two trillion for a record 91 consecutive market days to yesterday due to an almost perennial lack of revenue. The market has been short for a record 181 market days to yesterday. GoSL’s highest to the 185th highest FVMP debt has been registered for a record 185 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 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 and lower the cost of ‘essential’ imports, 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