Led by swap settlements between the Government of Sri Lanka ( GoSL) and the Central Bank of Sri Lanka (CBSL), where the former swapped rupees for US dollars with the latter, that increased market’s net shortfall (NS) by 6,685.76 per cent (Rs 163,400 million) to Rs 165,844 million today. Swaps between the GoSL and CBSL are foreign reserves neutral. Conversions are based on Thursday’s administered ‘spot’ value which was Rs 307.37 to the US dollar.
GoSL’s direct money printing borrowing costs (MPBCs) sharply decreased by 6.72 per cent (Rs 5,136.77 million) to Rs 71,347.39 million today 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.
GoSL’s face value (FV)MP debt deceased for the second consecutive market day to today, this time by 0.04 per cent (Rs 1,150 million) to Rs 2,864,601.27 million (Rs 2.8646 trillion), thereby marginally defraying demand-pull inflationary pressure.
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.