Tariffs sink Christmas cheer
By Paneetha Ameresekere
Government of Sri Lanka’s (GoSL’s) overnight announcement of the imposition of import taxes on at least 2,575 items (see yesterday’s Ceylon Today) effectively capped any depreciative pressure due to the usual seasonal Christmas demand, but in the obverse saw the benchmark ‘spot’ making a 10 cent pyrrhic gain to be trading at Rs185.40/50 to the US dollar in two-way quotes at 4 p.m. yesterday, market sources told this reporter.
However, in the calendar year to 4 p.m. yesterday, the ‘spot’ has fallen sharply by Rs 4.10 (2.26 per cent) in two-way quotes, thereby causing cost-push inflationary pressure as Sri Lanka is an import dependent economy.
In other negative developments, Government of Sri Lanka’s ( GoSL’s) money printing borrowing costs (MPBCs) sharply decreased by 1.36 per cent (Rs 249.51million) to Rs 18,133.05 million yesterday, led by investor preference to invest in risk-free Treasury (T) Bills and T-Bonds due to insecurity and uncertainty, rather than lend to the private sector, the engine of economic growth, from which source better gains could also be derived.
These developments have to be looked at in the context that GoSL’s face value (FV) MP debt remained unchanged at Rs 576,316.87 million yesterday, a case for MPBCs to marginally decline considering the end of the weekend, but not steeply.
Meanwhile, yesterday was also a record fifteenth consecutive market day that GoSL’s FVMP debt has been over the Rs half-a-trillion mark due to a sustained lack of revenue , in its second dispensation, after only a day’s ‘respite’ on 2 November when it went below the Rs half-a-trillion mark, then.
In other negative developments, due to the settlement/s of a GoSL foreign debt servicing commitment and/or due to Central Bank of Sri Lanka (CBSL) returning previously swapped dollars to the market upon maturity, the country’s foreign reserves were poorer for the second consecutive market day, this time by US$ 52.17 million (Rs 9.665 million) yesterday. Conversions are based on the middle rate of the ‘spot’ as at 4 p.m. on Thursday which was Rs 185.25 to the dollar. Consequently, market’s net excess liquidity steeply decreased by 5.21 per cent to Rs 175,801million yesterday.