Sri Lanka Central Bank Money printing increased and Rupee collapse

The rupee has already started to fall, triggering uncertainty among local and foreign market participants. CBSL has been giving liquidity shock to the market during the last couple of days by purchasing back government securities to release the money to the market which is a proxy for money printing. Excess money in the banking system jumped to over LKR 100 Bn from an average of less than LKR 50 Bn during January and February this year. Sudden jumped of CBSL holdings with-out parral adjustment in overnight liquidity indicates an outflow of exchange for the official reserves. Sri Lanka reserves stand at $7.95Bn end of February 2020.