Monday Markets: Reserves Bleed $42.28M

By Paneetha Ameresekere | Published: 12:26 AM Jun 8 2021

By Paneetha Ameresekere

The country’s foreign reserves were poorer by US$ 42.28 million (Rs 8,835 million) led by the settlement/s of Government of Sri Lanka’s (GoSL’s) foreign debt servicing commitments and/ or Central Bank of Sri Lanka (CBSL’s) swaps with the market and/or CBSL’s US dollar sales to and/ or swaps with GoSL during trading yesterday. Transactions between GoSL and CBSL are foreign reserves neutral. 

Conversions are based on CBSL’s administered ‘spot’ rate on Thursday which was Rs 199.53 to the dollar. The country’s foreign debt servicing commitments for the year are $ four billion, of which amount $ 1.2 billion has been paid by the end of 31 March. GoSL’s money printing borrowing costs (MPBCs) sharply decreased by 2.10 per cent (Rs 431.37 million) to Rs 20,095.83 million led by buying interest in low returns, riskless Treasury (T) Bonds and T Bonds in the secondary market rather than lend to the high returns growth engine the private sector due to sustained uncertainty yesterday. GoSL’s face value (FV) MP debt fell by Rs 3,000 million (0.34 per cent) to Rs 872,673.17million yesterday, partially mitigating demand-pull inflationary pressure. 

GoSL’s FVMP debt has been over Rs 0.5trillion for a record 142 consecutive market days to yesterday due to a lack of revenue. Net excess liquidity decreased by 11.29 per cent (Rs 11,385 million) to Rs 92,968 million at the end of yesterday’s trading. The benchmark administered ‘spot’s understood, but unwritten two way quotes were unchanged at Rs 199.75/200.25 to the dollar for the 14th consecutive market day up-to yesterday in the interbank foreign exchange (FX) market, with, ipso facto, no trades done, led by moral suasion, moving to an era of shortages and queues, reminiscent to that which dominated the economy from 1970-77, sources told this reporter. 

Friday was also the 26th 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 Rs14.35-14.75 (7.74- 7.95 per cent), thereby causing cost-push inflationary pressure in the event trades were executed even at these administered prices as Sri Lanka is an import dependent economy.

By Paneetha Ameresekere | Published: 12:26 AM Jun 8 2021

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