CPC bleeds reserves by $ 687M

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The country’s foreign reserves were poorer by US$ 686.63 million (Rs 247,061.45 million) led by at least part settlement of State owned Ceylon Petroleum Corporation’s (CPC’s)  foreign debt coupled with payments for new fuel imports on Friday. Conversions are based on Wednesday’s administered ‘spot’ value which was Rs 359.82 to the US dollar.

Consequently,  Government of Sri Lanka’s (GoSL’s) non- demand pull inflationary face value money printing (FVMP) debt increased by 7.88 per cent ( Rs 237,320.45 million) to hit a new record high of Rs 3,250,179.08 million (Rs 3.2502 trillion) on  Friday (8 July).

Central Bank of Sri Lanka (CBSL) Dr Nandalal Weerasinghe speaking to reporters on Thursday (7 July) said that because CPC has no rupees to meet its external commitments, CBSL is compelled to print rupees and lend to the same. GoSL’s FVMP debt has been over Rs three trillion for the third consecutive market day to Friday due to inadequate revenue.

 The increase in the value of GoSL’s MP borrowing costs (BCs) relative to the increase in its FVMP debt accelerated by 29.68 per cent (Rs 32,782.06 million) to Rs 143,226.38 million on Friday due to selling pressure of Treasury (T) Bills and T Bonds by investors in secondary market trading to reinvest in tomorrow’s (Tuesday, 12 July) Rs 65 billion T Bill auction on expectations of higher yields after CBSL increased its policy rates by 100 basis points on Thursday (7 July).

 Market was short for a record 203 market days to Friday, with this shortfall increasing by 1.57 per cent (Rs 9,741million) to 630,701 million, CBSL data showed. GoSL’s highest to the 207th highest FVMP debt has been registered for a record 207 market days to Friday. GoSL’s FVMP debt has been over Rs two trillion for a record 113 consecutive market days to Friday 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