Money printing over Rs 3 trillion for 2nd day

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Government of Sri Lanka’s (GoSL’s) demand pull inflationary face value money printing (FVMP) debt decreased by 0.40 per cent (Rs 12,198.52 million) to Rs 3,012,858.63 million (Rs 3.0129 trillion) on  Thursday (7), thereby marginally defraying demand pull inflationary pressure as well.

Nonetheless, GoSL’s FVMP debt has been over Rs three trillion for the second consecutive market day to Thursday. Liquidity was upped by Rs 36,991.52 million (USD 102.81 million) on Thursday, led by the settlement of transactions between the GoSL and Central Bank of Sri Lanka (CBSL).  Conversions are based on the administered “spot” value as at Tuesday (5), which was Rs 359.79 to the US dollar.

The decrease in the value of GoSL’s MP borrowing costs (BCs) relative to the decrease in its FVMP debt accelerated by 47.93 per cent (Rs 101,647.48 million) to Rs 110,444.32 million on Thursday due to panicky buying pressure of riskless, but low returns Treasury (T) Bills and T Bonds by investors rather than lend to the high returns private sector, the engine of growth, due to sustained uncertainty.

 Market was short for a record 202 market days to Thursday, though this shortfall decreased by 3.84 per cent (Rs 24,793 million) to 620,960 million, CBSL data showed. GoSL’s highest to the 206th highest FVMP debt has been registered for a record 205 market days to Thursday.GoSL’s FVMP debt has been over Rs two trillion for a record 112 consecutive market days to Thursday due to an almost perennial lack of revenue.

 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 on the reference day.

By Paneetha Ameresekere