MP in record Rs 500B mark for 13th day

Paneetha Ameresekere | Published: 2:00 AM Oct 26 2020

Paneetha  Ameresekere 

Government of Sri Lanka’s (GoSL’s) risk free  face value money printing (FVMP) debt sharply declined by 1.73 per cent (Rs 9,565 million) to Rs 544,594.87 million on Friday, thereby negating demand-pull inflationary pressure, as well, to an extent .

In tandem with these developments, GoSL’s MP borrowing costs (BCs) too steeply fell, by 1.42 per cent (Rs 223.32 million) to Rs 15,523.93 million at Friday’s trading. Nonetheless, GoSL’s FVMP debt has been stuck at the record half-a-trillion plus rupees mark for a record thirteenth consecutive market day to Friday, due to a lack of GoSL revenue.  

Meanwhile, market liquidity was uplifted by Rs 9,332 million (US$ 50.65 million) during Friday’s trading because of the settlement/s of a GoSL sale of US dollars to Central Bank of Sri Lanka (CBSL) and/or due to CBSL swapping rupees for dollars from the market. Transactions between GoSL and CBSL are foreign reserves neutral. Conversions are based on the middle rate of the benchmark ‘spot’ as at 4.00 p.m. on Wednesday which was Rs 184.25 to the dollar.

Consequently market’s net excess liquidity decreased by 0.15 per cent (Rs 233 million) to Rs 150,609 million on Friday, led by the aforesaid retirement of maturing FVMP debt of GoSL’s .

In other developments, the benchmark ‘spot’ ‘held’ at Friday’s trading, at Rs184.35/45 to the dollar at 4.00 p.m., market sources told this reporter. On the previous day Thursday, it had been trading weaker, by between 10 and 20 cents in two way quotes, at Rs 184.30/50 to the dollar in two way quotes also at 4.00 p.m.

However, in the calendar year to 4.00 p.m. Friday, the ‘spot’ has depreciated by Rs 3.05 (1.68 per cent) in two way quotes, thereby causing cost-push inflationary pressure as Sri Lanka is an import dependent economy. 

GoSL’s FVMP debt is equal to the FV of CBSL’s Treasury (T) Bills and T Bond holdings. Investments in T Bills and T Bonds are risk free, because, in the event GoSL is unable to honour such debt, CBSL is mandated to print demand-pull inflationary money and repay such creditors.

Paneetha Ameresekere | Published: 2:00 AM Oct 26 2020

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