Reserves blown by $130M
By Paneetha Ameresekere
Money market liquidity during Friday’s trading decreased for the second consecutive market day, this time sharply by Rs 26,210.7 million (US$ 129.72 million), vis-à-vis, at the discounted, albeit, so-called benchmark ‘spot’ price of Rs 202.05 to the US dollar as at Wednesday due to the possible settlement/s by part foreign reserves sales for the triple purposes to aid the market to import so-called essential items and also to meet net foreign outflows from the bourse and/or Government of Sri Lanka’s (GoSL’s) foreign debt servicing commitments.
GoSL’s non-demand pull inflationary face value money printing (FVMP) debt increased by Rs 2,319.70 million to Rs 1,803,399.58 million (Rs 1.8034 trillion) on Friday due to a lack of revenue. This increase on the whole was 0.13 per cent. GoSL’s FVMP debt has been over Rs one trillion for a record consecutive 92 market days to Friday.
GoSL’s at least theoretical MP borrowing costs fell for the sixth consecutive market day to Friday, this time too sharply, by 0.74 per cent (Rs 337.11 million) to Rs 45,151.88 million, driven by persistent uncertainty, resulting in market preference to invest in riskless, low returns Treasury (T) Bills and T-Bonds, rather than lend to the lucrative private sector, the engine of growth.
Money market was short for the 60th consecutive market day to Friday, thereby causing persistent rate pressure, with market shortfall steeply increasing by 8.29 per cent (Rs 23,891 million) to Rs 312,202 million.
The interbank foreign exchange (FX) market was ‘dead’ for the 147th consecutive market day to Friday with no outright transactions taking place, coupled with all trades in the FX market, including bank-client trades too, since midnight on 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.
Non-commercial consumer credit card trades such as for education and health however may be executed at a premium of five per cent over the administered ER of Rs 203 to the dollar, leading to such trades being executed at the Rs 213-214 levels to the dollar. Remittances too can be converted at a premium of Rs 10 per dollar, over and above its administered, albeit inflated rupee value of Rs 200 to the dollar, valid up to the year end (31.12.2021).
At the controlled ER of Rs 203, the ER will have had depreciated by 7.69 per cent (Rs 14.50) in the calendar year to Friday and year-on-year by between 9.52-8.32 per cent (Rs 17.65-15.60) to the dollar, respectively.