The Government of Sri Lanka (GoSL) borrowed Rs 38,768.99 million from the market on 1 January to retire an equivalent value of its face value money printing (FVMP) liabilities, thereby, reducing the value of the latter by 18.10% to Rs 175,461.41 million.
The GoSL was aided in this endeavour, due to the release of net excess liquidity to the tune of Rs 108,497.99 million on 1 January because of the flexibility of banks’ statutory reserves ratio requirement which obligation has to be in order only at the middle and end of a calendar month.
As a result, the market’s net shortfall declined by Rs 69,729 million (47%) to Rs 78,641 million, on 1 January. Meanwhile, the GoSL’s MP borrowing costs (BCs) increased by Rs 1,607.04 million (159.53%) to Rs 2,614.40 million on 1 January.
The reason why the market is short is due to the lack of inflows.
(Source: Ceylon Today – By Paneetha Ameresekere)