Wednesday, July 6, 2016

In a world of decreasing BOND yields, “CB Governor saying in light of Brexit we may see increasing yields” – IS WRONG

I am merely reporting what I read, and if the Governor has been quoted correctly, then, he is OUT OF TOUCH. I hope he is not going to cover himself, or find excuses even before it happens as to why he could not re schedule at much lower rates. Read link:

In the same publication they talk about record low yields of 30yr US treasuries, the currency in which our borrowings are, which is directly contradictory!

So as reported in the FT today, based on yesterday’s press conference, being the important policy evaluation statement from the new Governor, he make NO mention of being able to reduce the interest rate burden of foreign debt, which is HIS REAL TASK. All others SHOULD BE on autopilot if the CB staff are doing their job properly.

Of course I agree that he has to work closely with the Treasury to ensure they are able to maintain FISCAL DISCIPLINE that is essential to both, adhere to the terms of the IMF loans, but also to his ability to negotiate loan rescheduling at lower interest rates. He must look into immediately improving the rating of Sovereign debt to draw interest from foreign lenders purchase SL dollar debt, and his ability MUST be judged on how quickly he is able to save BILLIONS in interest payments on foreign loans.

In nothing he says, does he even allude to this with the Media. There maybe reasons behind this, as the media really don’t understand that point and trying to explain that can get lost with Media, who don’t understand Monetary policy, and may misrepresent what he says, to his and the Country’s detriment.

At this stage I will give him the benefit of the doubt, but will hold his performance measurement to how quickly he able to substantially lower the interest payment on our foreign debt, which will also help us to reduce our budget deficit, and deficit as a percentage of GDP, both parameters that he has a stake in!

We cannot give the Governor a honeymoon period bearing in mind that the opportunities presented to him, on a downward interest environment, is not going to remain, in perpetuity. It must be grabbed immediately for Sri Lanka’s advantage. Remember what you don’t do could be worse than what you do!! 

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