 at least direct, theoretical money printing borrowing costs (MPBCs) steeply increased by 7.34 per cent (Rs 5,223.12 million) to Rs 76,406.37 million, led by selling pressure on Treasury (T) Bonds){kind=link}
Government of Sri Lanka’s (GoSL’s) at least direct, theoretical money printing borrowing costs (MPBCs) steeply increased by 7.34 per cent (Rs 5,223.12 million) to Rs 76,406.37 million, led by selling pressure on Treasury (T) Bonds and T Bills in secondary market trading today (Monday 17 April), to reinvest in Wednesday’s (19 April) Rs 90 billion T Bill primary auction on expectations of high yields due to even
higher inflation, rather than lend to the private sector, the engine of growth.
Led by swap settlements between the GoSL and the Central Bank of Sri Lanka (CBSL), where the former swapped rupees for US dollars with the latter, saw liquidity decrease by Rs 198,372 million (US$ 620.24 million) during trading today. Conversions are based on last Tuesday’s (11 April) administered ‘spot’ value which was Rs 319.83 to the US dollar. Swaps between GoSL and CBSL are foreign reserves neutral.
Consequently GoSL’s non- demand-pull inflationary face value money printing (FVMP) debt increased by Rs 11,758 million today due to a sustained lack of revenue, thereby increasing GoSL’s FVMP debt as a whole by 0.40 per cent to Rs 2,978,508.44 million (Rs 2.9785 trillion).Subsequently, market’s net shortfall increased by 200.06 per cent (Rs 186,614million) to Rs 279,894 million today.
Meanwhile, 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.