Economy Forward

According to media reports, the central bank (CB) has rejected all bids received at the T bond auction held on 30 October. Therefore, this short article is to raise concerns whether the rejection of all bids is a new sign of the failure of present T bond issuance system. Present T bond issuance system Present system was introduced in the middle of 2017 by discontinuing the full auction system followed since the beginning of March 2015. Accordingly, the new the system is a so-called hybrid system containing the auction window and post-auction placement window as follows. Auction window - competitive bids received in the electronic auction system where accepted bids carry multi-prices/yields on each fixed coupon bond offered to the auction. Post-auction non-competitive placement window - Bids are received through e-mail from primary dealers whereas the auction weighted average yield is offered for all bids accepted manually on each bond announced for placements immediately ...

  The brand new Monetary Policy Board (MPB) at its infant meeting held on 4th October decided to cut policy interest rates by 1% to 10%-11% with effect from next day. (See the MPB's press release at the following link) https://www.cbsl.gov.lk/sites/default/files/cbslweb_documents/press/pr/press_20231005_Monetary_Policy_Review_No_7_2023_e_U53s8.pdf The objective of this short article is to highlight how a new fake monetary kingdom  which does not serve the general public and the economy  is due to be built by the MPB's monetary policy and to warn of underlying national risks. Therefore, it is the public duty of the national leaders to be aware of national risks of this monetary kingdom and to prevent it before being too late.  What is the role of MPB and policy interest rates? The MPB is a committee constituted with the sole authority to conduct the monetary policy of the country  in terms of the Central Bank of Sri Lanka Act (CBSLA). The  Act was certified ...

  Yesterday, the brand new Monetary Policy Board (MPB) cut policy interest rates by 1% to 10%-11% and urged the whole financial sector to pass the benefits of the continually eased monetary conditions of the economy to individuals and businesses in order for them to rebound of the economy. According to the CB's press release issued today, the MPB has had a divine-look on the economy before making this decision. However, the cut in Treasury bill yields by the CB Tender Board yesterday just before the MPB meeting is 0.2%, 0.04% and 0.14% for the three maturities (simple average cut of 0.13%), which are way below the policy rate cut decided by the MPB in the evening (see the CB press notice below). In fact, the Chairman of the Tender Board is now a powerful ex-officio member of the MPB and the Director of Economic Research who submitted the policy rate cut recommendation to the MPB is a powerful member of the Tender Board. Therefore, a legitimate public concern arises as to why t...

Monetary operations are the money printing operations carried out by the CB on a daily basis in order to keep the inter-bank daily liquidity conditions consistent with the monetary policy decisions. Monetary policy decisions are made on policy interest rates and other instruments. Such decisions show  2023 as the year of the peak of the supper tight monetary policy cycle as well as a sudden reverse cycle.  Therefore, this short article is presented to shed some light on the nature and outcomes of the CB's monetary operations during first three quarters (nine months) of 2023. In this period, 14 September is a historic point of the transition of the monetary policy and operations from the 73 year-long Monetary Law Act to a new legislation, Central Bank of Sri Lanka Act enacted as required by the IMF. The target group of the article is the economists conversant with concepts and practices on the monetary policy. The objective is to make them tend to ask themselves what the real p...