Money printing hits Rs 3.2223 Trillion


Government of Sri Lanka’s (GoSL ) demand pull inflationary face value money printing (FVMP) debt increased for the second consecutive market day to Friday (2 September) with Friday’s increase alone being a non-demand pull inflationary FVMP debt hike of 0.51 per cent (Rs 16,363.78 million) to a new second highest high of Rs 3,222,326.27 million (Rs 3.2223 trillion) due to a persistent lack of revenue.The previous second highest FVP debt figure of Rs 3.2060 trillion took place only on Thursday (1 September), while its highest value of Rs 3.25 trillion took place on 8 July 2022.

The country’s foreign reserves haemorrhaged by US$ 53.21 million (Rs 19,215 million) on Friday led by the settlement of payments made for ‘essential’ imports. Conversions are based on Wednesday’s administered benchmark ‘spot’ value of Rs 361.15 to the US dollar.

GoSL’s at least theoretical MP borrowing costs (BCs) relative to the increase in its FVMP debt accelerated for the second consecutive market day to Friday, with Friday’s acceleration being by 12.77 per cent (Rs 17,706.21 million) to Rs 156,401.05 million due to continued selling pressure of Treasury (T) Bills and T Bonds in secondary market trading to reinvest in Wednesday’s (7) Rs 75 billion T Bill auction on expectations of higher yields led by record high inflation.A key tool to combat inflation is to offer higher yields to reduce money circulation in the economy, thereby reducing demand for goods and services, hence enabling to bring down prices.

Market was short for a record 243 market days to Friday, with this shortfall increasing by 0.48 per cent (Rs 2,851million) to Rs 597,298 million, causing  sustained rate pressure. GoSL’s FVMP debt has been over Rs 3 trillion for a record consecutive 41 market days toFriday due to a sustained lack of revenue. Also, GoSL’s highest to the 246thhighest FVMP debt has been registered for a record 246 market days to Friday.

By Paneetha Ameresekere