Inflationary MP Up Rs 399M

By Paneetha Ameresekere | Published: 2:00 AM Jan 12 2022

By Paneetha Ameresekere

Government of Sri Lanka’s (GoSL’s) demand pull inflationary face value money printing (FVMP) debt increased by Rs 399 million yesterday and, on the whole by 0.28 per cent (Rs 5,407 million) to Rs 1,930,820.55 million (Rs 1.9308 trillion) yesterday.

GoSL’s at least theoretical  MP borrowing costs (MPBCs) declined by 0.72 per cent (Rs 318.64 million) to Rs 43,679.15 million yesterday due to buying pressure of riskless, low returns Treasury (T) Bonds and T-Bills in secondary market trading, rather than invest in the lucrative private sector the engine of growth due to sustained uncertainty.

Market liquidity yesterday fell by Rs 5,008 million (US$ 24.87 million) due to GoSL’s  foreign debt servicing commitments and the import of essential items met from the country’s foreign reserves at the discounted, administered, ‘benchmark’  ‘spot’ rate of Rs 201.33 to the  dollar as at  Friday. CBSL is nontransparent in its open market operations.

GoSL’s FVMP debt has been over Rs one trillion for a record consecutive 119 market days to yesterday.  Also, GoSL’s highest to the ninety first highest FVMP debt has been registered in the 92 consecutive market days to yesterday, though not necessarily in a particular order.

Money market was short for the 87th consecutive market day to yesterday,  though this shortfall fell by 0.09 per cent (Rs 399 million) to Rs 424,114 million, nonetheless causing nagging rate pressure.

Dead 174 Days

The interbank foreign exchange (FX) market was ‘dead’ for the 174th consecutive market day to yesterday, with no outright transactions of worth 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.  

Meanwhile, in the black market, the dollar was being traded at Rs 250 a unit, sources told this reporter recently (5 December 2021), a year on year depreciation of  Rs 56.50 (29.20 per cent). A weak ER causes cost push inflationary pressure as Sri Lanka is an import dependent economy.

By Paneetha Ameresekere | Published: 2:00 AM Jan 12 2022

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