Money printing over Rs 3 trillion for 11th day

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Market liquidity was uplift by Rs 67,910 million (US$ 188.03 million) led by the settlement of transactions between the Government of Sri Lanka (GoSL) and the Central Bank of Sri Lanka (CBSL) on Thursday (21). Conversions are based on the benchmark but administered ‘spot’ value of Rs 361.17 to the US dollar as at Tuesday. CBSL lacks transparency in its open market operations.

GoSL’s face value money printing (FVMP) debt decreased by 1.31 per cent (Rs 41,654 million) to Rs 3,126,318.47 million (Rs 3.1263 trillion) on Thursday, thereby marginally defraying inflationary pressure as well. GoSL’s FVMP debt has been over Rs 3 trillion for a record consecutive 11 market days to Thursday due to a perennial lack of revenue.

GoSL’s at least theoretical MP borrowing costs (BCs) decreased by 1.48 per cent (Rs 2,072.82 million) to Rs 137,901.97 million on Thursday, consequently. Market was short for a record 213 market days to Thursday, though this shortfall decreased by 4.40 per cent (Rs 26,256 million) to 571,104 million, nonetheless virtually causing perpetual rate pressure on Thursday. GoSL’s highest to the 216th highest FVMP debt has been registered for a record 216 market days to Thursday. GoSL’s FVMP debt has been over Rs 2 trillion for a record 122 consecutive market days to Thursday because of 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.

‘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.

By Paneetha Ameresekere