ECONOMYNEXT – Sri Lanka has failed to sell 63 percent of a 68.5 billion rupee Treasuries auction with a pre-declared controlled yield, data from the state debt office showed.
The debt office set a pre-auction price control of 5.97 percent for one year bills, 03 basis points below the 6.00 percent rate at which money is printed for overtrading banks to clear final transactions and maintain statutory reserves.
23.33 billion rupees of 3-month bills were sold at 5.92 percent up 05 basis points from a week earlier after offering 18 billion.
1.87 billion rupees of 6-month bills were sold at 5.95 percent, up 05 basis points after offering 23.0 billion rupees.
40 million rupees of 12-month bills were sold at 5.96 percent, after offering 27.5 billion.
Sri Lanka has lost reserves and is facing severe forex shortages and foods like milk and sugar as unsold bonds are bought by the central bank injecting liquidity, amid a recovery in private credit.
The central bank in August raised policy rates by 50 basis points to 6.0 percent, but has kept the auction ceilings which serve as de facto policy rates to inject money and trigger forex and food shortages.
On September 01, the statutory reserve ratio, of the share of deposits that banks have to deposit at the central bank is being doubled to 4.0 percent. However the central bank is expected to lend overnight at 6.0 percent to cover the gap.
Many banks are already short by 15 billion rupees amid reserve outflow.
Sri Lanka’s President has declared emergency regulations and appointed an army major general as commissioner to oversee essential foods. (Colombo/Sept01/2021)