Government's borrowing costs shot up sharply with inflows drying up, as result of which yesterday's Treasury (T) Bill primary auction saw the weighted average yield (WAY) of the 91 day (three month) T Bill increasing by as much as 26 basis points (bps) to 6.79% and the WAY of the 182 day (six month) and the benchmark.
364 day (one year) T-Bills increasing by as much as 20 bps each to 7.07% and 7.17% respectively. Year on year (YoY), the WAYs of three and six months and one year T-Bills have had increased by 60, 79 and 87 bps, despite the fact that policy rates have been cut by 50 bps each since, indicating that neither the CB or the authorities can fool the market, by acting contrary to both external and internal economic realities.
This is underlined by the fact that CB, on behalf of the government, sold only 32.63% of its original T-Bill amount that it had for sale yesterday, in a vain attempt to cap rising government borrowing rates. CB originally had on issue Rs 12,000 million worth of gross T-Bills, but ended up by selling only a mere Rs 3,916 million worth of T-Bills to the market, yesterday.
Meanwhile, government's gross borrowings by selling T-Bills and T-Bonds to the market in the calendar year to date increased by 129.40% or by Rs 706,120 million to Rs 1,251,799 million; compared to a borrowing of Rs 545,679 million made in the comparative period last year.
Such increased borrowings by the new regime are due to a combination of lagging revenue and higher government recurrent expenditure to honour promises of handouts made in respect of the 8 January, 2015 Presidential Poll and also in respect of the 17 August, 2015 General Election, both negativisms as far as the economy is concerned.
Courtesy: Ceylon Today 3 September 2015