Government of Sri Lanka’s (GoSL’s) non-demand-pull inflationary money increased by Rs 25,565 million, therewith increasing GoSL’s face value money printing (FVMP) debt as a whole by 0.87 per cent to Rs 2,977,117.08 million (Rs 2.9771 trillion) today (25 April) due to a sustained lack of revenue.
Reserves bled by USD 136.89 million (Rs 43,960 million) led by debt repayment settlements of the GoSL with multilateral donor agencies such as the World Bank, ADB and the IMF today (Tuesday 25 April). Conversions are based on last Friday’s (21 April) administered ‘spot’ value which was Rs 321.14 to the US dollar.
Central Bank of Sri Lanka’s (CBSL’s) open market operations (OMO) statistics from where the above figures are extrapolated; lacks transparency. Subsequently market’s net shortfall fell increased for the second consecutive market day to today, this time by 7.26 per cent (Rs 18,395 million) to Rs 271,914 million.
GoSL’s direct MP borrowing costs (BCs) sharply decreased for the second consecutive market day to today, this time by 2.43 per cent (Rs 1,855.32 million) to Rs 74,393.33 million due to buying pressure of Treasury (T) Bills and T Bonds in secondary market trading because of high yields offered, at the expense of lending to the private sector, the engine of growth.
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. Swaps between GoSL and CBSL are foreign reserves neutral.
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.