Money Printing Equals 1.02% of GDP (Rs 120.4B) CBSL Prints Rs 3.36B Inflation accelerates by 25%
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By Paneetha Ameresekere-2017-09-10
As a result, CBSL's Face Value money printing holdings increased by 2.87% over Thursday's figures to Rs 120,360.46 million, equal to 1.02% of GDP, as per last year's GDP figures.
The Census and Statistics Department's latest data showed that inflation, as measured by the Colombo Consumers' Price Index, year-on-year (YoY), on a month-on-month basis, accelerated by 25% (1.2 percentage points) to 6% last month (August), while its 12-month moving average accelerated by 1.85% (0.1 percentage point) to 5.5% in the review period.
The Government's tax revenue as at last year was equal to 12.36% of the GDP. The IMF wants this figure to be increased to 15% by 2019.
The Treasury also sold US$ 28.50 million (Rs 4,351.97 million), being part of the US$ 500 million it recently raised by a syndicated loan, to the Central Bank, thereby increasing the money market's net excess liquidity by Rs 7,712 million (31.11%) to Rs 32,505 million, Friday over Thursday, interpretation of CBSL's open market operations (OMO), statistics showed.
Such sales are foreign reserves neutral, ie neither leading to the increase nor decrease of the Government's total foreign reserves.
Net excess liquidity was further boosted by the Bank printing money carrying a face value of Rs 3,360.03 million.
Despite money printing, due to the Central Bank's debt management skills, coupled with falling rates, Government's money printing borrowing costs, Friday over Thursday, declined by Rs 62.24 million (4.35%) to Rs 1,369.31 million.
Meanwhile, a year ago, ie on 8 September, 2016, the Central Bank's book value money printing increased by Rs 56.1 million (0.03%) to Rs 195,870.92 million over the previous day's, 7 September, 2016, figures. Book value money printing as at Friday was Rs 118,991.15 million, a YoY decline of Rs 76,879.77 million (39.25%) since.
Face Value and Book Value Money Printing are the Central Bank's direct holdings of Treasury (T)-Bills, inclusive of the Government's borrowing costs due to the Central Bank because of money printing and the value of the Central Bank's direct holdings of T-Bills, excluding borrowing costs of Government, owed to the Central Bank, because of money printing, respectively.
When CBSL retires maturing T-Bills in its holdings (MP), that eases both GoSL's debt portfolio as well as inflationary pressure.
Similar to that which took place on Friday, led by the Treasury's sale of dollars to the Central Bank, Face Value net excess liquidity, 8 September, 2016 over 7 September, 2016, then too increased by Rs 14,168 million (277.64%) to Rs 9,065 million and its book value net excess liquidity by Rs 14,165.07 million (277.68%) to Rs 9,063.84 million.
This was aided by the Treasury, which at that time had raised $2.5 billion from international markets by issuing sovereign bonds and syndicated loans, selling $97 million (Rs 14,108.97 million) of such number to the Central Bank.
Conversions are based on the then middle 'spot' rate of the 'spot,' which, according to sources was Rs 145.45 to the dollar.
Increase in book value money printing,8 September, 2016 over 7 September, 2016, was Rs 56.1 million (0.03%), to Rs 195,870.92 million.
Previously, the Central Bank, in its OMO releases, showed only Book Value T-Bill holdings. It was only after the appointment of Dr. Indrajit Coomaraswamy as CBSL Governor last July, that the Face Value of such T-Bill holdings were also shown.
