Inflationary FVMP debt up Rs 32.23B

BY Paneetha Ameresekere | Published: 2:00 AM Oct 21 2020

BY Paneetha Ameresekere

Government of Sri Lanka’s (GoSL’s) demand pull inflationary face value money printing (FVMP) debt increased by Rs 32,232 million and on the whole by Rs 43,900 million (8.60 per cent) to Rs 554,159.87million yesterday due to lack of revenue.

This can be seen as a possible indicator that the Central Bank of Sri Lanka (CBSL) will keep its rates unchanged at tomorrow’s monetary policy meeting.

Consequently, GoSL’s FVMP debt continued to be stuck at a record Rs half-a-trillion plus territory for the tenth consecutive market day to yesterday.

Complementing these developments, the benchmark ‘spot’  weakened by between 25 and 15 cents in two-way quotes due to continued net foreign outflows because of uncertainty, to be trading at Rs 184.50/60 to the US dollar in two way quotes at 4pm yesterday, market sources told this reporter.

 However, in the calendar year to 4pm yesterday, the ‘spot’ has depreciated by Rs 3.20 (1.77per cent-1.76per cent) in two way quotes, thereby causing cost-push inflationary pressure. 

In related developments, due to the settlement/s  of GoSL’s foreign debt servicing commitments and/or CBSL  returning swapped dollars to the market, the country’s foreign reserves were poorer by US$ 63.31 million (Rs 11,668 million) yesterday. Conversions are based on the middle rate of the ‘spot’ as at 4pm on Friday (16) which was Rs 184.30 to the dollar.

Commensurate with these developments, GoSL’s MP borrowing costs (BCs) sharply increased by 15.45 per cent (Rs 2,133.04 million) to Rs 15,938.82 million, possibly aided by CBSL buying into Treasury (T) Bonds and investor exits from T Bonds and T Bills with expectations that there will be a rate cut at tomorrow’s monetary policy meeting. 

Subsequently the market’s net excess liquidity increased by Rs 32,232 million (26.17per cent) to Rs 155,415 million yesterday.

BY Paneetha Ameresekere | Published: 2:00 AM Oct 21 2020

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