‘Spot’ gains by Rs 1.55 in four days
By Paneetha Ameresekere
The benchmark ‘spot,’ boosted by exchange controls and assured of political stability after Wednesday’s Parliamentary Poll, sharply gained for the second consecutive day, this time by 75 cents, to trade at Rs 184.00/10 to the US dollar in two-way quotes at 4:00 p.m. yesterday, market sources told this reporter.
Yesterday was also the fourth consecutive market day that the ‘spot’ made gains. In the four market days to yesterday, the ‘spot’ has steeply gained by Rs 1.55 (0.84 per cent -0.83 per cent) in two-way quotes. Nevertheless, in the calendar year to yesterday the ‘spot’ has weakened by 1.49 per cent (Rs 2.70) in two-way quotes, thereby causing cost-push inflationary pressure, as Sri Lanka is an import-dependent economy.
In related developments, swaps between the Central Bank of Sri Lanka (CBSL) and the Government of Sri Lanka (GoSL), possibly also due to such similar swaps executed between CBSL and commercial banks and/or GoSL’s sales of dollars to CBSL, followed by exporter conversions, saw market liquidity being uplifted by Rs 9,180.98 million (US$ 49.51 million) during the course of yesterday’s trading. Conversions are based on the middle rate of the ‘spot’ as at 4:00 p.m. on Friday (7 August), which was Rs 185.45 to the dollar.
Howbeit, CBSL, the steward of the country’s foreign debt and of its foreign reserves, transactions with the market and also with the GoSL are not transparent, in that it expects reporters to make arithmetical deducements to trace CBSL’s interventions in open market operations, by maintaining radio silence of its involvement in the market.
In other developments, GoSL’s face value money printing (FVMP) debt decreased by Rs 12,129.98 million, and, consequently, GoSL’s total FVMP debt fell by 3.80 per cent to Rs 307, 074.47 million at the end of yesterday’s trading, thereby mitigating demand-pull inflationary pressure as well.
Nonetheless, domestic investors feeling it more secure in investing in safe haven Treasury (T) Bills and T-Bonds (GoSL Securities) saw GoSL’s MP borrowing costs (BCs) sharply decrease by 16.97 per cent (Rs 164.25 million) to Rs 803.73 million at the end of yesterday’s trading.
Further, market’s net excess liquidity decreased by 1.62 per cent (Rs 2,949 million) to Rs 179,391 million at the end of yesterday’s trading, impacted by the retirement of maturing T-Bills and/or T- Bonds in CBSL’s holdings.
‘Spot’ trades are settled after two market days from the date of transaction. GoSL’s FVMP debt is equal to the FV of CBSL’s T-Bills and T-Bond holdings. MP is CBSL’s sole and mandated authority. MP is exercised to meet GoSL’s monetary commitments in the absence of adequate revenue and increased GoSL expenditure. However, if MP ends up at the hands of GoSL only, without ‘once more’ being passed on to CBSL, for instance as settlement to buy the required dollars to meet GoSL’s foreign debt servicing commitments from the former (CBSL), then, that causes demand-pull inflationary pressure.