Economic Situation, T-Bond, and Treasury Bill Sales in Sri Lanka

By Engr. Kanthar Balanathan

DipEE (UK), GradCert(RelEng-Monash),DipBus&Adm(Finance-Massey), C.Eng., MIEE, 

Former Director of Power Engineering Solutions Pty Ltd, Consulting Electrical Engineers

 

General

Residents, and diaspora should be aware of the economic situation and development in Sri Lanka. We cannot just sit and close our eyes (like the cock-eyed chicken) assuming that the Sri Lankan administration is doing well in the financial system management. The difference between the third world and the developed world is that the third world economic deceleration is must faster than that of the developed world. As SL is our mother country, wherever we are, we have a responsibility to make our observations, comments, and suggestions for changes. Politicians do not own SL. They are there to serve the people.

E.g., India for that matter has improved very much and very rapidly in the economic environment, purely because they invested in agriculture, science and technology and currently leading in digital technology. The Brahmins have showed their colour in intelligence and knowledge and the capacity to acquire such advanced technical knowledge.

The country has no racial violence and discrimination. Intelligence people have been given the proper place in the society. The shortfall of the Tamil Nadu state is that they claim of “Dravidian” origin. Humans shall assess in terms of reality not assumptions. Every political party in Tamil Nadu has a word “Dravida” mingled in their party name. Similarly in Sri Lanka the Tamils have the word “Tamil” associated in the political party name.

This drives for conclusion that the Tamils do not consider “Economics and Finance” for developments and survival.

Therefore, India is a well-known intellectual country.

The country is so large and to manage their finances, and administration, they divided into financially manageable states and given adequate powers for development. However, SL being a small poor nation, first, have not got the economic and financial wealth, power to operate several states and Councils. This is the pure and only reason for not being a federal state administration. If so, the British would have given autonomous state power in 1948. We, the Tamils should understand this and build the nation and the N&E with wealth, then request for power. Tamils have an eager to show that they are politicians and ministers. During the PCs period every politician like garlanding and present for photograph and publish the photos. What did they achieve. NOTHING.

The day Srimavo signed contracts with China for Cement kiln bricks and BMICH which exhibited close ties with China, problems gave birth in SL. Afterall she is a well-known unqualified IDIOT. Today under the Rajapaksas, SL went down, and Pakistan, although has nuclear capability, focussed on Kashmir and India, and not their sustainability, was driven down to poverty because of rivalry on both sides. (Afghanistan + India).

Today with the current president (RW) who has a revolutionary mind in economics can boost up the finance and elevate SriLankan economy. Within a short period, the president + the Central Bank (CB) have shown credibility and we can see the improvement in the economy. Although as the foolish people, who do not want to work, but expect everything free, do not understand economy and finances in the society. People shall understand this concept.

Analysis

Today the inflation rate stands at 65%.

Nominal interest rate = (real risk-free interest + Inflation + default risk premium + liquidity premium + maturity risk premium)

Inflation impacts on interest rate and commodity prices. If the Bank prints money, the country will have too many notes, however, less products. The price shoots up because of too many buyers with liquid cash. This is where supply and demand come into play.

The country should maintain its productivity to keep the prices low. This is exactly what’s happening in SL today. GOSL should generate revenue for its local expenses and salaries. This where taxes play an important part. Every citizen shall oblige the country by paying its dues to the government. For example: Several politicians did not pay their water bills and electricity bills for donkeys’ years. How do they expect the business to pay salaries and meet its development/augmentation of plant and equipment costs.

Although System demand studies may have been conducted by the appropriate business/industries, they may not be able to augment the plants due to lack of funds.

Treasury (CB)

How do government get its money if taxes are not paid?

What is the difference between T-bills and Treasury bonds?

·       Bonds are generally for 30 years.

·       Notes between 1-10 years at 3.5%.

·       Bills are between 6 months to one year.

CB is trading the following on the 18^{th of} January 2023.

Quote: Excerpt from CB Web page: https://www.cbsl.gov.lk/

 

Rs. 95,000 million (Rs 95 Billon) Treasury bills are to be issued through an auction on 18^th January 2023.  The details of Treasury bill issues are as follows. 

Maturity Period                          91 Days	182 Days                  364 Days              Total
ISIN*                                  LKA09123D219	LKA18223G219     LKA36424A198
Amount Offered (Rs. Mn.)           55,000		20,000                      20,000               95,000
Date of Auction	:	18th January 2023
Date of Settlement	:	20th January 2023
Date of Issue	:	20th January 2023
Closing date and time of bid submission	:	Wednesday 18th January 2023, at 11.00 a.m.
Minimum amount of a bid	:	Rupees five million (Rs. 5,000,000/-) and multiples of Rupees one million (Rs. 1,000,000/-) there onwards.

 

It is assumed that this money is required by GOSL for its local expenses. May be to pay salaries. It is hoped that the GOSL/CB would have completed (i) a preliminary study on this project as to how they propose to use this fund (ii) how they will generate to pay back the bond money. Governments should not go and buy money in the market without doing a proper study. If so, this government would be assumed as operating in a jungle.

 

Citizens who have internet facilities should visit the following web page and check frequently to acquire more knowledge and or public awareness. https://www.cbsl.gov.lk/

 

Governments shall operate with openness and transparency.