• Money pumped into market through reverse repo last week
• Data shows reserve money growing from Rs. 1.3 tn to Rs. 1.6 tn
• Move to support decision to limit access to standing facilities

The Central Bank of Sri Lanka (CBSL) temporarily pumped in Rs 300 billion through term reverse repo last week to bring the interest rates down by converting the money market positive, CBSL weekly indicators showed.

Accordingly, the Reserve Money at CBSL increased from Rs 1,361 billion to Rs 1,661 billion by the end of last week as the Total Overnight Market Liquidity stood at Rs 136 billion by Friday (20).

Speaking to The Daily Morning Business, the Head of Research at First Capital Dimantha Mathew said that the CBSL have massively pumped money through term reverse repo into the system which has converted the money market to a positive.

He noted that through this move, the CBSL is looking at accelerating pushing down the interest rates and supporting the decision of limiting access to standing facilities.

Mathew said that pumped money through term reverse repo has to be paid back to CBSL by the borrowers once the term matures, therefore, it is not technically printed money.

He added that the CBSL has been pumping reverse repo since 5 January, when the Open Market Operations announcement was first made.

As of 20 January, Call Money Market gross volume was at Rs 6,550 million and the repo market gross volume was at Rs 3.3 billion.

Interbank lending which was at a complete standstill has resumed with a high amount of transactions happening in the market.

Therefore, Mathew said that gradually, the CBSL will take this money out or roll over until the time they think that it is appropriate to reduce the amount in the money market.