 face value money printing (FVMP) debt fell for the seventh consecutive market day to today, this time by 1.51 per cent (Rs 43,802.71 million) to Rs 2,860,134.69 million){kind=link}
Government of Sri Lanka’s (GoSL’s) face value money printing (FVMP) debt fell for the seventh consecutive market day to today, this time by 1.51 per cent (Rs 43,802.71 million) to Rs 2,860,134.69 million (Rs 2.8601trillion), thereby marginally defraying demand-pull inflationary pressure ‘as well,’ led by swap settlements between the GoSL and Central Bank of Sri Lanka (CBSL), where the former swapped US dollars for rupees with the latter. Conversions are based on last Wednesday’s (10 May) administered ‘spot’ value which was Rs 318.092 to the US dollar.
Meanwhile, GoSL’s direct MP borrowing costs (BCs) sharply increased by 10.29 per cent (Rs 6,427.46 million) to Rs 68,909.89 million today due to selling pressure of Treasury (T) Bills and T Bonds in secondary market trading, to reinvest in Wednesday’s (17 May) largest ever T-Bill auction, the sale of Rs 180 billion Treasuries, on expectations of high yields, but at the expense of denying lending to the private sector, the engine of growth.
Consequently, market’s net shortfall fell for the second consecutive market day to today, this time by 77.06 per cent (Rs 193,471million) to Rs 57,593 million. CBSL’s open market operations (OMO) statistics from where the above figures are extrapolated; lacks transparency. 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. Swaps between the GoSL and CBSL are foreign reserves neutral.
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.