Monday Markets: GoSL’s FVMP Debt Passes Rs 900 B after 39 Days
By Paneetha Ameresekere
Government of Sri Lanka’s (GoSL’s) face value money printing (FVMP) debt passed Rs 900 billion after 39 days yesterday, with its non-demand pull inflationary FVMP debt increasing by 2.50 per cent (Rs 22,001 million) to Rs 903,119.37 million. GoSL’s FVMP debt has been over Rs 0.5 trillion for a record 147 consecutive market days to yesterday due to a lack of revenue.
GoSL’s money printing borrowing costs (MPBCs) sharply decreased by 2.01 per cent (Rs424.90million) to Rs 20,763.53 million, yesterday, due to investors buying into low returns Treasury T-Bills and T-Bonds in secondary market trading rather than lend to the lucrative private sector, the engine of growth, due to sustained uncertainty.
Liquidity decreased for the second consecutive market day to yesterday, this time by Rs 43,595 million (US$218.32 million) led by the settlement/s of GoSL’s foreign debt servicing commitments and/or CBSL’s swaps with the market and/or CBSL’s US dollar sales to and/or swaps with GoSL during trading. Transactions between GoSL and CBSL are foreign reserves neutral. Conversions are based on CBSL’s administered ‘spot’ on Thursday which was Rs 199.68 to the dollar.
The country’s foreign reserves bled by $1.2 billion in the first quarter due to GoSL’s foreign debt servicing commitments which total $ four billion for the full year, where the market is avoided to meet such liabilities for fear that that would cause further depreciative pressure on the rupee and where such liabilities are met from the country’s foreign reserves.
The benchmark administered ‘spot’ was administratively kept unchanged at Rs 199.75/200.25 to the dollar for the 19th consecutive market day to yesterday in the interbank foreign exchange (FX) market, with no trades done, led by moral suasion.
Friday was also the 31st consecutive market day than no trades were executed in the interbank FX market. Nonetheless, the unsaid market exchange rate (MER) has theoretically depreciated by between Rs 12.25-11.75 (6.53-6.23 per cent) in two way quotes in the calendar year to yesterday and year on year by between Rs 14.40-14.85 (7. 77-8.01 per cent), thereby causing cost-push inflationary pressure in the event trades were executed at those administered prices.