Overnight injections in Sri Lanka exceed 600 billion rupees amid reserve outflows

Night injections in Sri Lanka exceed 600 billion rupees amid sterilized interventions

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

The overnight liquidity short is 476 billion rupees, compared to 366.2 billion rupees as of December 31.

Sri Lanka has officially revealed that the stock of central bank treasury bills rose to 1.566 billion rupees on February 2 from 1.416 billion rupees on December 31, when the reserve currency also increases in the middle of the crisis. festival request.

The estimated stock of central bank treasury bills after overnight withdrawals is estimated at around 2.2 trillion rupees as of February 3.

Overnight withdrawals were 70 billion rupees.

Excess liquidity is deposited at the central bank counter on a day-to-day basis. These deposits amounted to about 58 billion rupees.

In January, the reserve currency generally decreases years of monetary stability.

However, the reserve currency rose to 1,335 billion rupees in January 2021 from 1,299 billion rupees as of December 31, with a full price adjustment in the economy to a negative real rate of 6.5%.

In January, inflation hit 14.1%, faster than the rate of the State Bank of Pakistan, a frequent IMF client.

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

The increase in injections overnight indicates outflows of reserves for imports and debt repayment, including Sri Lanka’s development bonds that are not being rolled over.

Analysts have urged that rates be raised, that reserve sales for imports be halted (suspension of convertibility or floating) to allow imports to match inflows.

Overnight or other injections (at 6.5%) after giving reserves for imports (set at 200 to the US dollar) tend to stimulate imports and credit and are a clear sign of a currency crisis self-powered.

There were calls for giving more import reserves, including from some who had called for a floating of the currency. (Colombo/February 3, 2021)