Inflationary MP up Rs 2.02B

By Paneetha Ameresekere | Published: 2:00 AM Dec 3 2021

By Paneetha Ameresekere

Government of Sri Lanka’s (GoSL’s)  face value  money printing (FVMP) debt increased by Rs 5,055 million (0.28 per cent) to Rs 1,801,079.88 million (Rs 1.8011 trillion) yesterday due to a lack of revenue.

Of this increase, Rs 2,020 million was demand pull inflationary causing.  GoSL’s FVMP debt has been over Rs one trillion for a record consecutive 91 market days to yesterday.

GoSL’s at least theoretical MP borrowing costs fell for the fifth consecutive market day to yesterday, this time by 0.91 per cent (Rs 416.25 million) to Rs 45,488.99 million, driven by uncertainty, resulting in the market investing in riskless, low returns Treasury (T) Bills and T Bonds, rather than lend to the lucrative private sector, the engine of growth.

Money market was short for the 59th consecutive market day to yesterday, thereby causing persistent rate pressure, though market shortfall fell by 0.70 per cent (Rs 2,020 million) to Rs 288,311 million. 

Money market liquidity during yesterday’s trading decreased by Rs 3,035 million (US$ 15.02 million), vis-à-vis, at the discounted, albeit ‘spot’ price of Rs 202.05 to the US dollar as at Tuesday due to the possible settlement/s from part foreign reserves sales for the dual purpose to aid the market to import so called essential items and also to meet net foreign outflows from the bourse. 

The interbank foreign exchange (FX) market was ‘dead’ for the 146th consecutive market day to yesterday with no outright transactions taking place, coupled with all trades in the FX market, including bank-client trades too, since midnight 6 September, mandated to be executed under a controlled exchange rate (ER) regime of between Rs 202-203 to the dollar, aiding in the spawning of a black market. 

By Paneetha Ameresekere | Published: 2:00 AM Dec 3 2021

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