Sri Lanka overnight injections top Rs600bn amid sterilized interventions | Sinhala News

Sri Lanka overnight injections top Rs600bn amid sterilized interventions

ECONOMYNEXT – Sri Lanka’s overnight liquidity injections to the banking system topped 600 billion rupees on February 02, from around 424 billion rupees a month earlier, amid continued reserves losses for imports and debt repayment.

The overnight liquidity short is 476 billion rupees, from 366.2 billion rupees on December 31.

Sri Lanka officially disclosed Treasury bills stock of the central bank went up to 1,566 billion rupees on February 02 from 1,416 billion rupees on December 31, when reserve money also expands amid festival demand.

The estimated Treasury bill stock of the central bank after overnight repo withdrawals is estimated around 2.2 trillion rupees by February 03.

The overnight repo withdrawals were 70 billion rupees.

Excess liquidity is deposited at the central bank’s overnight window clean. Such deposits were around 58 billion rupees.

In January reserve money usually falls in years with monetary stability.

However reserve money grew to 1335 billion rupees by January 2021 compared to 1,299 billion rupees on December 31 with full accommodation of prices in the economy at negative real rate of 6.5 percent

In January inflation rose to 14.1 percent, faster than the rate of the State Bank of Pakistan, a frequent IMF customer.

Broad money has been growing at high rates for two years and in January.

The rising overnight injections point to reserve outflows for imports and debt repayments including Sri Lanka Development Bonds.

Analysts have urged for rates to be hiked, reserve sales for imports to be halted (suspension of convertibility or a float) to allow imports to be matched to inflows.

Overnight or other injections after giving reserves for imports (pegging at 200 to the US dollar) at 6.5 percent (a sterilized reserve sale) tends to boost imports and credit.

There have been calls to give more reserves from import including from some who had called for a float of the currency. (Colombo/Feb03/2021)

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