Sri Lanka money supply, rates up on festive cash demand

April 09, 2007 (LBO) - Heavy cash withdrawals from banks to fund spending in the new year festive season drove up call money rates Monday with reserve money also shooting up, dealers said. “Most of the big fish are gone on holiday, either out of Colombo or overseas,” said Reshan Kurukulasuriya, Vice President, DFCC Stockbrokers. Call money bid-offer rates opened around 20–25 percent and rose towards 26-27 percent. Market repo rates were around 19-22 percent.

“The market’s a bit short. Because of the festive season there’s a bit of a crunch for money,” said a dealer.

“Most guys are on the borrowing side.

That’s the reason for money to be high.”

Dealers said call rates should remain high till about the end of next week when the cash draw down from the banking system peaks.

More than a million government employees are given festival advances in April ahead of the Sinhala and Hindu New Year festival which falls in the middle of the month.

From the end of the month the cash comes back to the system.
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According to Central Bank data, reserve money rose 14.6 billion rupees to 266.7 billion rupees in the week ending April 4, from 252.1 billion the week before.

Central Bank holdings of treasury bills went up to 47.6 billion rupees for the week ending April 4 from almost 44 billion rupees the previous week.

Stock market activity was also quiet Monday with a turnover of only nine million rupees in early morning trade mostly by small-time retail investors.