MER ‘Holds’

By Paneetha Ameresekere | Published: 2:00 AM Apr 9 2021

By Paneetha Ameresekere 

The market exchange rate (MER) in interbank trading, which was one week’s forwards for the 11th  consecutive market day, due to almost perennial controls, held, unchanged at  Rs 201.50/202.50 to the US dollar in two way quotes  at 4 p.m. yesterday.

 The sustained spread of 100 cents between the ‘buy’ and ‘sell’ quotes in the MER is an indication of uncertainty. 

In the calendar year to yesterday, the MER has weakened by Rs 14 (7.47-7.43per cent) in two way quotes and year on year by Rs 2.50 (1.26-1.25per cent), thereby causing cost-push inflationary pressure as Sri Lanka is an import dependent economy as seen by the country suffering perennial deficits in the balance of payments in the current account since 1978.

Government of Sri Lanka’s (GoSL’s) money printing borrowing cost (MPBCs) decreased by 0.27 per cent  (Rs 55.60 million) to Rs 20,616.37 million due to the market’s (licensed commercial banks (LCBs) and primary dealers (PDs)) preference to invest in riskless, low returns Treasury T-Bills and T-Bonds in secondary market trading yesterday rather than lend (LCBs) to  the high returns  growth engine the private sector due to uncertainty.

 Central Bank of Sri Lanka’s (CBSL’s) non- demand-pull inflationary face value money printing (FVMP) assets increased by Rs 3,644 million to meet GoSL’s  external commitments, thereby upping GoSL FVMP debt by 0.37% to Rs 933,329.22 million yesterday.

  GoSL’s FVMP debt has been over Rs 0.5 trillion for a record 106 consecutive market days to yesterday due to a lack of revenue.

Settlement/s of transactions pertaining to CBSL’s protection of the rupee from market depreciative pressure and/or CBSL’s swaps with the market (LCBs) and/or CBSL’s US dollar sales and/or swaps with GoSL and/or foreign debt servicing commitments of GoSL saw liquidity being  compressed for the second consecutive market day, this time by Rs 7,087 million (US$ 35.48 million)) yesterday. 

By Paneetha Ameresekere | Published: 2:00 AM Apr 9 2021

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