The country’s foreign reserves on a gross basis were up by US$ 49.42 million (Rs 17,839 million) on Tuesday ( 23), led by the settlement of gross inflows. Conversions are based on the administered value of the benchmark ‘spot’ as at Friday which was Rs 361 to the US dollar.
Government of Sri Lanka’s (GoSL’s) face value money printing (FVMP) debt decreased by 0.23 per cent (Rs 7,380 million) to Rs 3,157,862.36 million (Rs 3.1579 trillion) on Tuesday, thereby marginally defraying demand-pull inflationary pressure as well.
Meanwhile, the fall in GoSL’s at least theoretical MP borrowing costs (BCs), relative to the decline in GoSL’s face value money printing (FVMP) debt, accelerated by 0.68 per cent (Rs 871.41million) to Rs 126,637.58 million on Tuesday led by buying pressure of Treasury (T) Bills and T Bonds in secondary market trading due to expectations of higher yields for the second consecutive market day.
Latest Central Bank of Sri Lanka (CBSL) data showed that while Banks’ average weighted prime lending rate (AWPLR) on Friday was 25.68 per cent, whereas last week’s benchmark 364-day (one year) T Bill fetched a higher weighted average yield of 29.14 per cent, 346 basis points more than Friday’s AWPLR.
GoSL’s FVMP debt has been over Rs three trillion for a record consecutive 33 market days to Tuesday. Also, GoSL’s highest to the 238th highest FVMP debt has been registered for a record 238 market days to Tuesday. Market was short for a record 235 market days to Tuesday, though this shortfall decreased by 1.61 per cent (Rs 10,459 million) to Rs 638,114 million, nonetheless causing sustained rate pressure.
Transactions between the CBSL and the GoSL are foreign reserves neutral and CBSL which administers daily open market operations; lacks transparency. 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