Reserves bleed $80 million

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The country’s foreign reserves bled for the second consecutive market day to Thursday (28), with value being USD 13.09 million
(Rs 4,726 million), thereby increasing such haemorrhaging to USD 80.26 million in the review period, led by the settlement of payments in relation to making essential imports. Central Bank of Sri Lanka (CBSL) lacks transparency in its open market operations.

Government of Sri Lanka’s (GoSL) at least theoretical money printing borrowing costs (MPBCs) decreased for the fourth consecutive market day to Thursday with reduction alone being by 1.27 per cent (Rs 1,672.44 million) to Rs 130,458.21 million, led by sustained buying pressure of riskless but ‘low’ returns  Treasury  Bills and T Bonds in secondary market trading, rather than investing in the high returns private sector, the engine of growth,  because of perennial uncertainty.

GoSL’s  non-demand-pull inflationary face value (FV) MP debt increased for the second consecutive market day to yesterday, with yesterday’s increase being by 0.08 per cent (Rs 2,431 million) to Rs 3,127,106.40 million (Rs 3.1271 trillion), due to a perennial lack of revenue. GoSL’s FVMP debt has been over Rs 3 trillion for a record consecutive 16 market days to yesterday.

Market was short for a record 218 market days to yesterday, with this shortfall increasing by 0.40 per cent (Rs 2,295 million) to 571,286 million, thereby virtually causing perpetual rate pressure. GoSL’s highest to the 221st highest FVMP debt has been registered for a record 221 market days to yesterday.

Transactions between CBSL and the GoSL are foreign reserves neutral. 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 minimize 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