GoSL’s interest cost down Rs 3.6B

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By 2017-02-15

By Paneetha Ameresekere

Central Bank of Sri Lanka's (CBSL's) modus operandi of continuously retiring maturing Treasury (T) Bills in its holdings, reaped dividends to the Government of Sri Lanka (GoSL), with the latter's money printing costs reducing dramatically by 32.16% (Rs 3.586.54 million) to Rs 7,564.86 million yesterday, over Monday's interest costs, data showed.

Yesterday was the third consecutive market day that CBSL retired part of its T Bill holdings (money printing inclusive of interest cost of such), thereby helping GoSL to control such costs. Despite such continuous retirements of maturing T Bills (inclusive of interest costs), money printing at the end of yesterday's trading threw up a figure of Rs 211,916.45 million, equivalent to nearly 5,000% of market's excess liquidity figure position at the end of the day's trading, yesterday, which threw up a negative, net, excess liquidity figure of
Rs 4,579 million. The money market, due to the continuous retirement of maturing T Bills in CBSL's holdings, threw up a net shortfall for the third consecutive market day, yesterday.

As a result, the weighted average rate (WAR) of market repos increased by two basis points (bps) to 8.51% yesterday, though the administered WAR of call money fell by one bp to 8.44% yesterday.

Meanwhile, the money market saw a net outflow of Rs 2 million yesterday. If this was due to the protection of the rupee, either in the government securities market (GSM) or due to GoSL's foreign debt servicing commitments, then such an outflow would have had been equivalent to US$ 13,267 flying out from CBSL's foreign reserves, considering that the current 'spot' rate is
Rs 150.75 to the US dollar. CBSL deals in 'spot' with the market, where such trades are settled after two market days from the date of transaction.

With CBSL's moral suasion net continuously casting its shadow over the interbank foreign exchange (FX) market to prevent depreciative pressure on the rupee led by foreign exits from the GSM, coupled with import demand, the exchange rate (ER) was bridled at
Rs 151.20/25 to the dollar in two weeks' forwards around 3.55 p.m. yesterday, market sources told this reporter.

Markets close at 4.30 p.m. With the average selling price of the ER for telegraphic transfer (TT) in the real FX market at Rs 152.45 to the dollar, a foreigner exiting from the GSM will be able to buy his dollars at a discounted rate of Rs 150.78 to the dollar from the CBSL's foreign reserves, where this figure is arrived on the basis that such a selling price is Rs 150.75 plus selling bank's commission of Rs 0.03 for each of such dollar units sold. This gives the foreigner a price advantage of Rs 1.67 (1.11%) when making such purchases.

In contrast, in the stock market, the bourse made gains for the second consecutive market day yesterday, boosted by net foreign inflows (NFIs) for the ninth consecutive market day yesterday, led by foreign interest in JKH, the market's largest capitalized stock.

As a result, the benchmark ASPI gained by 0.17% to 6,148.94 points and the more sensitive S&P SL 20 Index by 0.33% to 3,532.93 points on a nominal Rs 548.94 million turnover. Total number of shares which changed hands was 20.25 million.
Number of gainers was 78 and losers, 59. NFIs amounted to Rs 58.17 million, of which JKH's contribution was Rs 78.84 million. As a result, net foreign outflows (NFOs) in the calendar year to date contracted to Rs 414.75 million. Foreigners buying shares from the bourse, have their dollars converted at Rs 150.72 to the dollar, where this figure is derived from the administered spot rate of Rs 150.75 minus Rs 0.03 being bank commission. However, the buying bank will sell such dollar inflows to CBSL at the administered 'spot' rate of Rs 150.75 to the dollar. Meanwhile, the average buying rate of the dollar for TT yesterday was Rs 148.72, still giving the foreigner a price advantage of Rs 2 (1.34%) for each dollar sold compared to the hapless local, whether such a person is an exporter, or more appropriately, a remittance beneficiary, selling dollars to his bank. Remittances are Sri Lanka's largest FX earner.

Meanwhile, turnover was led by Dialog, the market's fifth largest capitalized stock with a figure of Rs 131.21 million on a 11.93 million SV. Dialog closed flat at Rs 11 a share. Next was JKH (Rs 103.47 million) on a 690,385 SV. JKH closed up 1.01% to Rs 149.90 a share. No other stock entered the Rs 100 million turnover club yesterday. Dialog led the way vis-à-vis NFOs with a figure of Rs 20.55 million.

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