Le PM argues that “Mo pa kapav fer STC al fer faillite”; but , Sir Pinochio, all our institutions are going the Sri Lankan way!
Constructing the accounts for April 2022 from the sector balance sheet and the central bank survey for April 2022, it shows a deficit of about Rs 5 bn in comprehensive income, which means reserves are wiped out, as well as a bit of equity.
In June, BoM will compute valuation gains for the year, which should be sizeable, even following the recent small appreciation of the rupee..
What could have led to the sizeable loss in April 2022. ?
Is that unrealised losses from rupee appreciation, plus losses on fair value through Profit & Loss portfolio in US dollars translated in rupees, the most likely cause ?
This means unrealised losses (or gains) are included in comprehensive income monthly, maybe to be set off against the Special Reserve Fund only at end of financial year!
It’s time for Board of Directors of BoM to "tuit " !
Some comments received:
1. The Overview section has been suppressed in the April issue of MS Bulletin of BoM.
2. Looks like all this lack of transparency in the unpublished April 2022 Financial Statement of BoM reflects the adverse impact of the appreciation of the rupee between end March 2022 and end April 2022.
3. If these trends persist , there may be an urgent need to recapitalize the BoM due to the adverse impact on its capital & reserves. BoM is cornered between the depreciation of the rupee and the impact of the appreciation of the currency as between end March and end April 2022.
4. Appreciation of the rupee vis a vis the US$ , GBP and Euro in April 2022 had adversely impacted the Foreign Exchange Reserves of BoM in that month .
5. There are limits to Bom intervention in the domestic FX Market due to its negative impact on the balance sheet of BoM.
6. Need to watch Capital & Reserves of BoM as we go along.
7. If these trends persist , there may be an urgent need to recapitalize the BoM due to the adverse impact on its capital & reserves.
8. Perhaps the MIC could help in bailing out the BoM- investing in the distressed businesses that are systemically important to our economy ! Now we understand why Pada and his BoM boy do not want to relinquish ownership of the MIC !
