Led by swaps between the Government of Sri Lanka (GoSL) and Central Bank of Sri Lanka (CBSL), where the former swapped US dollars for rupees from the latter, saw liquidity increase by Rs 204,417 million (USD 635.94 million) during today’s trading. Conversions are based on Tuesday’s (2 May) administered ‘spot’ value which was Rs 321.44 to the US dollar.
Meanwhile, GoSL’s direct money printing borrowing costs (MPBCs) sharply decreased for the third consecutive market day to today (Thursday(4 May)), this time by 2.51 per cent (Rs 1,784.84 million) to Rs 69,358.72 million due to sustained buying pressure of Treasury (T) Bills and T Bonds in secondary market trading, attracted by the high yields offered by the same, but at the expense of lending to the private sector, the engine of growth.
Consequently GoSL’s face value (FV) MP debt fell for the second consecutive market day to today, this time by 0.11per cent (Rs 3,265 million) to Rs 2,969,535 million (Rs 2.9695 trillion), thereby marginally defraying demand-pull inflationary pressure ‘as well.’ Subsequently, market’s net shortfall also fell for the second consecutive market day to today, this time by 86.14 per cent (Rs 201,417 million) to Rs 32,372 million.
CBSL’s open market operations (OMO) statistics from where the above figures are extrapolated; lacks transparency. Swaps between GoSL and CBSL are foreign reserves neutral.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.