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Sri Lanka central bank kills Rs15bn excess liquidity

ECONOMYNEXT – Sri Lanka’s central bank has withdrawn 15 billion rupees of excess liquidity from money markets by selling Treasury bills outright Monday in a monetary tightening move, after cutting rates and printing money steadily from April, sending the rupee sliding.

The central bank sold 45 day bills in its portfolio at 5.85 percent, 52 day bills at 6.11 percent and 59 day bills at 6.11 percent through outright sales, dealers said.

Sri Lanka had 149 billion rupees of excess liquidity up to last Thursday, most of from outright money printing by purchasing Treasury bills in to the balance sheet of the Central Bank.

But at last Wednesday’s Treasury bill auction, authorities accepted around 3 billion rupees more than the maturing bills, ending a several weeks of money printing. Rates also moved down.

In December a higher volume of taxes are due to come to the Treasury. Typically central bank profit and some other non-tax revenues also may come.

The total Treasury bills stock of the Central Bank moved down to 115 billion rupees on Friday from 118 billion rupees a day earlier.

Any liquidity that is killed by outright sales of Treasury bills preserves as equal equivalent amount of foreign reserves as they cannot be turned into credit and imports by banks.

The last outright sale of Treasury bills took place in April 27 after some bills taken in return for a foreign reserve appropriation were sold down. (Colombo/Nov30/2015)

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