Sri Lanka bank credit falls in April, May

ECONOMYNEXT – Sri Lanka’s credit from the banking system fell to Rs29.3 billion in March and $44.6 billion in May, down from over Rs100 billion a month in the first quarter of 2016, amid repayments by state enterprises, official data show.

The government borrowed only Rs5.3 billion in April and Rs6.1 billion in May from commercial banks.

In May, there was a net central bank credit repayment (printed money) of Rs17 billion, indicating a contraction of excess demand.

State-owned enterprises have been net re-payers of debt for three months in the row, helped by energy utilities. SOE’s repaid Rs21.7 billion in May, up from Rs3.4 billion in April.

Private credit rose to Rs60.2 billion in May, down from a low of Rs27.4 billion in the traditional New Year holiday month.

If state borrowings moderate, so-called crowding out reduces and private entities can borrow more and invest.

If there is no new central bank credit being injected, the monetary system will also not be destabilised. (Colombo/August02/2016)

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