 face value money printing (FVMP) debt deceased for the third consecutive market day){kind=link}
Government of Sri Lanka’s (GoSL’s) face value money printing (FVMP) debt deceased for the third consecutive market day to today, this time by 0.05 per cent (Rs 1,367 million) to Rs 2,863,234.27 million (Rs 2.8632 trillion), thereby marginally defraying demand-pull inflationary pressure.
Settlement of foreign debt servicing costs to multilateral donor agencies like the IMF, the World Bank and the ADB saw the country’s foreign reserves bleed by US$ 39.79 million (Rs 12,166 million)today. Conversions are based on Friday’s (19 May) administered ‘spot’ value which was Rs 305.38 to the US dollar.
Consequently, market’s net shortfall increased for the second consecutive market day to today, this time by 8.16 per cent (Rs 13,533 million) to Rs 179,377 million.
GoSL’s direct MP borrowing costs (BCs) sharply decreased for the second consecutive market day to today, this time by 2.61 per cent (Rs 1,865.31 million) to Rs 69,482.08 million due to buying pressure of Treasury (T)- Bills and T-Bonds in secondary market trading attracted by high yields offered by the same, but at the expense of denying lending to the private sector, the engine of growth.
Swaps between the GoSL and CBSL are foreign reserves neutral. 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. 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.