CBSL prints Rs 582 M Reserves suffer US$ 105.06 M drain
By Paneetha Ameresekere
The Central Bank printed Rs 582 million and paid out US$ 105.06 million (16,221.97 million) from its foreign reserves yesterday (12), interpretation of official data showed.
The Central Bank prints money and lends to the Government of Sri Lanka (GoSL) to help the latter to meet its monetary commitments in the absence of adequate revenue. Yesterday's depletion of foreign reserves was led by the Central Bank settling some of its short-term swap commitments with domestic banks.
The GoSL and the Central Bank recently gave......a commitment to the International Monetary Fund to downsize their short term swap commitments with domestic banks. Conversions are based on the closing price of the middle rate of Thursday's (8) 'spot' value which was Rs 154.40 to the dollar. The Central Bank deals in 'spot,' the settlements of which take place after two market days from the date of transaction.
As a result of these actions, Net Excess Liquidity (NEL) fell by Rs 15,639.97 million (73.07 per cent) to Rs 5,765.03 million yesterday. Due to money printing (MP), the GoSL's MP commitments increased by 11.23 per cent to Rs 5,765.03 million yesterday, thereby, creating inflationary pressure.
Meanwhile, the GoSL's MP Borrowing Costs (BCs) registered a figure of Rs 256.26 million yesterday.
In a similar operation, a year ago on Thursday, 9 February 2017, the country's foreign reserves were drained by an amount of US$ 200.72 million (Rs 30,258.38 million), interpretation of the then open market operations data showed. Friday, 10 February 2017 was a Poya holiday for the markets.
This haemorrhage was due to a combination of foreign exits from the Government Securities Market (GSM) and/or the GoSL's foreign debt servicing commitments and the CBSL's swap settlements with domestic banks.
In the week ended Wednesday 15 February 2017, the GSM suffered a Net Foreign outflow (NFO) of US$ 117.46 million (Rs 17,707.18 million). Conversions are based on the then administered 'spot' which was Rs 150.75 to the dollar. However, currently, the 'spot' operates in a liberalized environment.
Also, to aid the GoSL in its monetary commitments in the absence of adequate revenue, the CBSL printed Rs 13,502.38 million, thereby increasing its Face Value (FV) MP liabilities by 6.11 per cent to Rs 234,612.45 million on 9 February 2017.
Due to the aforesaid drawdown in foreign reserves, the NEL on 9 February 2017 over 8 February 2017, fell by Rs 16,756 million (65.03 per cent) to Rs 9,010 million. Meanwhile, due to MP, the GoSL's MPBCs increased by Rs 61.54 million (0.79 per cent) to Rs 7,881.28 million on 9 February 2017.
Also, a year ago, on 9 February 2017, the Central Bank's FVMP holdings registered a figure of Rs 234,612.45 million.
The 'spot' at times is controlled to minimize Sri Lanka's Rupee debt costs. Usually, the Treasury is bereft of dollars unless it has raised dollars by way of a syndicated loan or by a sovereign bond or by a similar vehicle. Nonetheless, more often than not, such costs are met from the Central Bank's foreign reserves after buying the required greenbacks by paying the Central Bank its rupee value in 'spot' equivalents. Therefore, a weak 'spot' will only inflate the GoSL's rupee debt stock. To prevent such a scenario, the GoSL exerts moral suasion on the 'spot,' like what happened on 9 February 2017.
The interbank foreign exchange market is avoided to meet the GoSL's foreign debt servicing commitments for fear that such would cause depreciative pressure on the rupee.
Further, in an administered 'spot' environment, where, however, the market is allowed the liberty to deal in other tenures to find the true value of the dollar, nonetheless, with regard to foreign transactions in the GSM, such transactions are also dealt in 'spot,' as per the arrangement, when the GoSL/Central Bank, for the first time, partially opened the GSM for foreign investments in 2006.
Otherwise, such foreign investors would not have come to the market. Therefore, in a controlled 'spot' environment, the required dollars to feed foreign exits from the GSM too, are also bought from the country's/the Central Bank's foreign reserves after paying for them in 'spot,' resulting in the depletion of the country's foreign reserves as well as rupee liquidity from the market.
The CBSL is the sole issuer of rupees to the market and sometimes prints money equivalent to the direct holdings of its FV Treasury Bill holdings to aid the GoSL to meet its monetary obligations in the absence of adequate revenue. Activities such as those are referred to as MP. But MP may cause demand-pull inflationary pressure, while increasing the GoSL's rupee debt liabilities.
- Khaleda Zia’s conviction and its repercussions
- China is biggest impediment to Korean reunification
- Trump’s Budget Priorities: Crimes Against Humanity?
- Mahanayake Thera of Asgiriya Chapter says Unity Govt should be scrapped
- Corruption case against Wimal on 16 May
- Govt won’t last till next General Election - JO
- Lankan fisherman yearns to return home
- EU awards 18 schols To promote sustainable consumption and production
- Ready for a rally
- Harassing tribal woman Lankan held in Andhra Pradesh
- People are very angry says Mavai
- Awards for bright religious students
- Delimitation Committee Report Govt must hold APC CaFFE
- Father of two requires urgent kidney transplant Seeks public help to raise Rs 1.5 M
- 2014 Aluthgama riot Govt to compensate victims in March & April
- Gajaba Regiment hands out schols
- Leadership training for principals suspended
- PAFFREL urges Appoint maximum number of women possible
- Tender irregularities hinted at A/L Tab Project temporarily suspended Project is being re-evaluated Rajitha
- CID wants INTERPOL ‘Red Notice’ on Mahendran
- Inquest into Bellanwila thera’s death Coroner complains to IGP Claims Boralesgamuwa Police ignored warnings
- 14 Hump Nosed Lizards born at Dehiwala Zoo
- EC informs party secys and ind group leaders 25% of 8,356 elected must be women Speaker says 25% quota not scrapped
- SL bidder for EAP Group chastises CBSL Over negotiation process
- Non-renewal of MoU Unity Govt cannot continue – Opposition
- In form CR to try and outmatch Kandy
- Havelocks face Navy SC at Race Course
- Madushanka doubtful for Nidahas Trophy
- SLSRFA to conduct workshop
- Trinity close on heels of St. Aloysius
- Khan leads Afghanistan to thumping series win
- Sri Lanka face India in the curtain raiser
- Third doping scandal hits Games
- Bayliss willing to step aside as T20 coach
- Brazilian match abandoned after brawl
- Shirantha promises transparency and accountability in NOC
- Rashid, Bumrah joint No.1 in ODI rankings
- Wigan shock Man City
- Black Caps coach rejects call to scrap T20
- Richmond in comprehensive win
- Arsenal announce record shirt deal with Emirates
- Olympics reels as ‘clean’ Russian curler hit by doping case
- Kandy SC too good for Airmen
- Red Stars SC emerge division I champions
- Hundreds participate in CISM Run
- Sampath Bank reports Profit After Tax above Rs 12B
- Dfcc Bank records impressive performance in 2017
- Hayleys Advantis partners IRONMAN 70.3 Colombo
- SL troops facelift Sakkotei tourist attraction
- Pantum becomes distributor for EWIS Peripherals
- Hyundai Lanka appoints AutoMaasters as authorized dealer in Jaffna
- Will online retailing outdo traditional retailing?
- Sarvodaya Finance joins LankaPay Common ATM Network
- JLanka Technologies to participate at Architect 2018
- Edirisinghe Brothers’ Hybrid Hub, SLIC to open Hybrid Vehicle Clinics
- NDB holds all-night Pirith ceremony
- AI-powered Dialog Voice Agent now on Google Assistant
- SLIM represents SL at prestigious conference in Asia
- NTB American Express travel around the world winners to visit five cities
- Munchee Super Cream Crackers ranks on top
- Ceylinco Life donates High Dependency Unit to Kalubowila Hospital
- Asian shares slip as dollar firms
- Cabinet approval underway for National Audit Bill Bill to be tabled in Parliament shortly
- Unpoliticized Maritime Promotion Bureau required: Ports Authority Chairman
- ComBank licensed for Microfinance operations in Myanmar
- Bouncing back from LG election drubbing
- Subramanian Swamy’s love-hate relationship with Sri Lanka
- Tea, haircuts and fish bones Letting the light into Pakistan
- REVISITING SRI LANKA’S FOREIGN POLICY
- Howlers that wreck language
- Welcome to Earth
- Can nuclear technology zap hunger?
- Trapped by the system Ethiopian workers in Lebanon see no freedom
- Current Marketing Practices Customer is King! Does it really apply to us?
- Writing project for young Syrian refugees
- Gota is Lankan Putin – Gammanpila
- President and PM are responsible for the election results
- Basil says…Await the return of ‘Spiritual Leader’ MR
- Rajapaksas’ Presidential hopeful is Gota
- Sins of the past Govt cannot be forgotten- Anura Kumara
- Accomplice to the crime Our own indifference
- UK flower farm suspected of enslaving migrants
- Costly Renovation
- REV. PROF BELLANWILA WIMALARATANA THERA
- Why Masses Brought Victory to Past President
- White Sapphire absorbs the power of Venus
- Partial eclipse that occurred on Feb 16
- Effects of Sun in Aquarius
- Some recent impressions
- Bandula Nanayakkarawasam: From Galle to the world
- Pauline Kael: The critic wore cowboy boots
- Pauline Kael: The critic wore cow boy boots
- “Hail, Caesar!” Silliness as a virtue
- Notes on history: The thinkers and the doers
- Reflections on a nation of non-readers
- The Disaster Artist: The (un)making of a movie
- Kite Surfing Lanka Kalpitiya An experience of a lifetime
- Ella and mini Adam’s Peak
- A cave of history -Ravana Cave
- Never say never to anything!
- What’s In My Bag I want to carry my dog Ricky Ruchira
- Indian Elegance Raaya Clothing & Accessories
- Election promises that took people for a ride
- 7 killed in Florida school shooting by former student: sheriff
- Man with moustache who went to Rajarata a thousand times in a ramshackle Jeep