Sri Lanka busts half a billion dollars on soft-peg during 'coup'
ECONOMYNEXT - Sri Lanka has spent half a billion US dollars to defend a soft-peg on the rupee in November 2018, during a so-called 'constitutional coup' which de-stabilized markets and triggered credit downgrades.
Unlike a hard peg, a soft-pegged central bank prints money after defending the currency by injecting more new rupees in the banking system to maintain artificial interest rates, provide non-existent deposits for banks to give new loans, in contradictory policy.
Sri Lanka's President Maithripala Sirisena triggered a political crisis on October 26, by appointing ex-President Mahinda Rajapaksa as Prime Minister violating Sri Lanka's constitution in a 'constitutional coup'.
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In November the central bank sold 519.23 million dollars to defend a soft peg at 180 to the US dollar and printed money through an overnight window, term reverse repo deals, at rates below the previous months and dumped tens of billions of rupees through reserve ratio cut.
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Sri Lanka was downgraded by three rating agencies to 'B' from 'B+' during citing the political crisis.
Sri Lanka's official forex reserves, - which include those held by the Treasury - dropped 884 million US dollars or 11.2 percent during November to 7,018 million US dollars.
Read more: https://economynext.com/Sri_Lanka_b...ars_on_soft_peg_during__coup_-3-12962-10.html
ECONOMYNEXT - Sri Lanka has spent half a billion US dollars to defend a soft-peg on the rupee in November 2018, during a so-called 'constitutional coup' which de-stabilized markets and triggered credit downgrades.
Unlike a hard peg, a soft-pegged central bank prints money after defending the currency by injecting more new rupees in the banking system to maintain artificial interest rates, provide non-existent deposits for banks to give new loans, in contradictory policy.
Sri Lanka's President Maithripala Sirisena triggered a political crisis on October 26, by appointing ex-President Mahinda Rajapaksa as Prime Minister violating Sri Lanka's constitution in a 'constitutional coup'.
...
In November the central bank sold 519.23 million dollars to defend a soft peg at 180 to the US dollar and printed money through an overnight window, term reverse repo deals, at rates below the previous months and dumped tens of billions of rupees through reserve ratio cut.
...
Sri Lanka was downgraded by three rating agencies to 'B' from 'B+' during citing the political crisis.
Sri Lanka's official forex reserves, - which include those held by the Treasury - dropped 884 million US dollars or 11.2 percent during November to 7,018 million US dollars.
Read more: https://economynext.com/Sri_Lanka_b...ars_on_soft_peg_during__coup_-3-12962-10.html
