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.