The benchmark ‘spot’ continued to make strides at today’s trading too, this time gaining by Rs two (0.68- 0.67 per cent) to be ‘going’ at Rs 294.00/295.00 to the US dollar in two way quotes, sources who didn’t want to be named told ‘BMD.’
This ‘spot’ has made consecutive gains for seven market days to today, increasing in value by between 4.08 and 3.9 per cent in two way quotes (Rs 12.50-12.00), thereby y squashing demand-pull inflationary pressure as Sri Lanka is an import dependent economy.thr. Subsequently, year on year (YoY) to today the ‘spot’ has steeply gained by between Rs 66-79.00 (18.33-19.18 per cent) to the dollar in two way quotes.
The current strengthening of the rupee is after the Government of Sri Lanka (GoSL) and the Central Bank of Sri Lanka (CBSL) entered into an IMF Staff level agreement for the release of a USD three billion Extended Fund Facility (EFF) spread over a four year period, with the first tranche of $ 330 million released in March itself.
CBSL buys dollars from the market to strengthen the country’s parlous foreign reserves, but at the expense of weakening the rupee, but when there is a ‘pause,’ like what happened yesterday for instance, that helps to strengthen the rupee.
A year ago the ‘spot’ was trading unchanged for the tenth consecutive market day to 30 May 2022 at Rs 360/365 to the dollar in two way quotes, statistics also showed. Meanwhile, CBSL strengthened the administered ‘spot for the sixth consecutive market day to today, this time by 0.10 per cent (Rs 0.31) to Rs 296.69 to the dollar. A year ago CBSL weakened the administered ‘spot’ sharply by 0.42 per cent (Rs 1.51) to Rs 360.76 to the dollar, thereby aiding the steep YoY weakening of the official ‘spot’ by 17.76 per cent (Rs 64.07) to the dollar by today.
‘Spot’ trades are settled after two market days from the date of trading. CBSL the steward of Government of Sri Lanka (GoSL) debt and of its foreign reserves deals in the official ‘spot.’ The official ‘spot’ is usually artificially propped up to minimize the cost of GoSL’s foreign debt in rupee terms and also to minimize GoSL’s foreign debt servicing costs in rupee terms.