Borrowings to increase by massive Rs 507B Money printing up 2,201%

[Future123Active Member]

It is inevitable that the inflation would rise due to money printing and heavy borrowings. The government should increase the fuel prices without further delay.

http://www.ceylontoday.lk/22-97457-news-detail-borrowings-to-increase-by-massive-rs-507b-money-printing-up-2201.html

Borrowings to increase by massive Rs 507B Money printing up 2,201%

By Paneetha Ameresekere

Ceylon Finance Today: The current regime inched closer to the dubious target of reaching the Rs One trillion mark in domestic borrowings when it announced that it plans to raise another Rs 62,000 million by selling Treasury (T) Bills and T-Bonds to the market this week.
Already it has borrowed Rs 914,622 million by selling T-Bills and T-Bonds to the market in the calendar year to date. With that envisaged borrowings, it will take the current Government's borrowings by selling T-Bills and T-Bonds to the market to Rs 976,622 million.

In the same period last year, the previous regime borrowed a miserly Rs 469,308 million by selling T-Bills and T-Bonds to the market. Therefore, the envisaged increase in borrowings to Rs 976,622 million is a massive Rs 507,314 million or a 108.1% rise, year on year (YoY).

The increase in such borrowings is to keep election pledges made in respect of the presidential election of 8 January, 2015 .which was won by UNP backed Maithripala Sirisena. a Rs 10,000 monthly wage hike to public servants, one of the pledges made at that election, is said to cost the Exchequer an additional Rs 30,000 million monthly.
These have to be looked at in the context that general elections are due in another month's time on 17 August, 2015. The present government is controlled by the UNP. Therefore, to keep these pledges is expected to be to the UNP's advantage.
These rupee borrowings include, borrowings made to pay maturing debt, a term known as "rollover debt."

In related developments, the government plans to raise another US$ 75 million by selling Sri Lanka Development Bonds (SLDBs) this week, thereby taking up its foreign commercial borrowings in the calendar year to date to US$ 2,727.75 million. This amount includes another envisaged borrowing of US$ 500 million, which bids are currently being evaluated by the Tender Board.
In the same period last year, the previous regime borrowed a mere US$ 1,926.50 million from the market. Therefore, the envisaged borrowing of US$ 2,727.75 million in the calendar year to date is a US$ 801.25 million or a 41.6% increase over similar borrowings made by the previous regime in the same period last year.
Such increased commercial borrowings are due to a dearth in inflows, due to the current, unstable political situation besetting the country. Some of these foreign borrowings are also rollover borrowings.

Market sources expect matters to be regularized only after the 17 August poll.
In similar developments, money printing YoY as at yesterday increased by a massive 2,201% or by Rs 48,130.33 million to Rs 50,317.06 million. Money printing, in the form of Central Bank lending to the Government is due to a dearth in inflows, causing an illiquid situation in the market.
But the negative aspect of money printing is that it pushes up demand side inflationary pressure on the economy, hitting the poor and the fixed wage earner the hardest.

[Hybrid]

Treasury Bill rates will increase and start a roller coaster effect on all borrowings!

Good for some part of the population as inflation alone will not fully devalue the capital base of depositors.

[Future123Active Member]

It's very dangerous borrowing so heavily just to pay salaries of the government staff. This will have a bad effect on overall credit rating of the country and outlook.

[කිත්සිරි ද සිල්වාTop contributor]

NATO boys will ruin the party.

[LeonTop contributor]

May be RK is realizing the truth in a harder way.

[balapasTop contributor]

Except the govt salary increase of rs 7,000 and pension by rs 1000, allowance increases were planned during MR's time. Doctors were promised rs15,000 by MR but this govt gave only 10,000 saying money issues even that after threatening to strike. Likewise many govt institutes had allowance increases. Even the pension anomaly increases this month was planned during MRs time. This increase will see pension of some people going up significantly. The Salary commission had these recommendations out for more than a year.

[guruji]

U know unp is giving more jobs to miner staff in health ministry,we received some,n other ministries do same,burden on ppl

[කිත්සිරි ද සිල්වාTop contributor]

What happens when we hit the dubious target of reaching the Rs One trillion mark in domestic borrowings?

[yellow knifeTop contributor]

Time to study Greece 

We are following PIIGS

Out of these PIIGS , Ireland was the best example for Good Governance in Europe...but economically mis managed...

[NC`Top contributor]

I think they've controlled nicely the inflation rate, and unemployment rate that's why they go for these big borrowings..
In 2014, inflation was around 5% - 2%. But now its,
around 0.2% - 0.1%.
Core inflation 2.8%. There's a smaller rise, but still less than last year which was around 3% - 4%.
Check... http://www.tradingeconomics.com/sri-lanka/inflation-cpi

So, I don't think they'll raise the interest rate, as they control the money supply and inflation. They keep consider rising USD and fuel price. Fortunately, fuel prices again drops back...

[Future123Active Member]

Heavy borrowing (over 100% increase than 2014) and heavy money printing to pay government staff salaries will have adverse effects on the economy in a couple of months time as per the economic theories.

[BackstageTop contributor]

I think they've controlled nicely the inflation rate, and unemployment rate that's why they go for these big borrowings..
In 2014, inflation was around 5% - 2%. But now its,
around 0.2% - 0.1%.
Core inflation 2.8%. There's a smaller rise, but still less than last year which was around 3% - 4%.
Check... http://www.tradingeconomics.com/sri-lanka/inflation-cpi

So, I don't think they'll raise the interest rate, as they control the money supply and inflation. They keep consider rising USD and fuel price. Fortunately, fuel prices again drops back...

The fed hike looks like wont happen this year. Seems to me there is a reconfiguration of the world financial markets happening on many fronts, turmoil, but we might even benefit. Our geo political advantage is at a peak, hope we will make use of this unique opportunity.