Wednesday Markets: FVMP debt over Rs 1T for 5th day
By Paneetha Ameresekere
Government of Sri Lanka’s (GoSL’s) nondemand-pull inflationary face value (FV) MP debt increased by Rs 3,146 million yesterday due to a lack of revenue, therewith upping its FVMP debt as a whole by 0.26 per cent to Rs 1,235,172.05 million (Rs 1.235 trillion). GoSL’s FVMP debt has been over Rs 1 trillion for a record five consecutive market days to yesterday.
GoSL’s money printing borrowing costs (MPBCs) sharply decreased for the second consecutive market day to yesterday, this time by Rs 183.68 million (0.64 per cent) to Rs 28,611.47 million due to market preference to invest in riskless, low returns Treasury (T) Bills and T-Bonds in secondary market trading rather than lend to the high returns private sector the engine of growth. The interbank foreign exchange (FX) market was ‘dead’ for the 60th consecutive market day to yesterday due to Central Bank of Sri Lanka (CBSL)/GoSL continuing to fix the benchmark ‘spot’ price at an unrealistic rate of Rs 202/203 to the US dollar in twoway quotes amid depreciative pressure.
If, however, trades were executed even at the administered selling rate of Rs 203 to the dollar, the market exchange rate (MER) in interbank FX trading will have had depreciated by Rs 14.50 (7.69 per cent) in the calendar year to yesterday and year-onyear by Rs 17.24 (9.28 per cent), thereby causing cost-push inflationary pressure, as Sri Lanka is an import-dependent economy. Liquidity decreased by Rs 4,472 million (US$ 22.37 million) yesterday due to the settlements of GoSL’s foreign debt servicing commitments and/or CBSL’s swaps with the market and/or CBSL’s sales of dollars to GoSL.
Net excess liquidity decreased by 6.07 per cent (Rs 1,326 million) to Rs 20,523 million at the end of yesterday’s trading. As at 4:00 p.m. on 31 December 2020, the selling rate of the MER in the interbank FX market, which, up to one week’s forwards, was trading at a superimposed fashion at 188.50 to the dollar because of CBSL’s/ GoSL’s moral suasion. A year ago the selling rate of the MER in the interbank FX market which then was the ‘spot’ due to ‘more relaxed’ controls was trading at Rs 185.76 to the dollar. Conversions are based on CBSL’s administered ‘spot’ price on Monday, which was Rs 199.93 to the dollar.