Government of Sri Lanka’s (GoSL’s) direct money printing borrowing costs (MPBCs) sharply decreased by 4.73 per cent (Rs 3,625.18 million) to Rs 73,019.65 million due to buying pressure of Treasury (T) Bills and T Bonds in secondary market trading yesterday, attracted by the high yields offered by the same, but at the expense of lending to the private sector, the engine of growth).
Market liquidity was drained by Rs 243,142.09 million (US$ 755.97 million or Rs 243.1 billion) during yesterday’s (Tuesday 2 May) trading led by swap settlements between the Government of Sri Lanka (GoSL) and the Central Bank of Sri Lanka (CBSL), where the former swapped rupees for US dollars with the latter. Conversions are based on last Thursday’s (27 April) administered ‘spot’ value which was Rs 321.63 to the dollar.
Subsequently market’s net shortfall increased by 313.35 per cent (Rs 193,045 million) to Rs 254,652 million and GoSL’s non demand-pull inflationary face value money printing (FVMP) debt by Rs 50,097.09 million due to a perennial lack of revenue, therewith increasing the totality of GoSL’s FVMP debt by 1.70 per cent (Rs 50,097.09 million) to Rs 2,990,836 million (Rs 2.99908 trillion) yesterday.
CBSL’s open market operations (OMO) statistics from where the above figures are extrapolated; lacks transparency. Swaps between GoSL and CBSL are foreign reserves neutral.MP, coupled with being the steward of the country’s foreign reserves and of its debt is the exclusive prerogative of the CBSL. GoSL’s FVMP debt is equivalent to the totality of CBSL’s T Bill and T Bond holdings.
GoSL’s MPBCs are prorated to the outcome in secondary market trading of T Bills and T Bonds on the reference day. ‘Spot’ trades are settled after two market days from the date of transaction. CBSL, the steward of GoSL debt and its foreign reserves deals in ‘spot.’ The ‘spot’ is administered to minimize GoSL’s foreign debt repayments and foreign debt as a whole in rupee terms.
Issuing of T Bills and T Bonds is a popular way GoSL raises money domestically to meet its local commitments. Investing in T Bills and T Bonds is generally considered as being riskless, because, in the event GoSL is unable to repay such debt, CBSL is normally mandated to print demand pull inflationary money and repay such creditors.