Sri Lanka borrowings from banking system sharply higher for third month: data

COLOMBO (EconomyNext) – Sri Lanka’s state, state enterprises and private businesses have borrowed 108.9 billion rupees in November 2014, amid falling forex reserves, with private credit rising to a two year high, official data showed.

November’s loans came on top of 94.9 billion rupees of total credit given by the banking system to private and state borrowers and 104.8 billion rupees given in September.

In the three months to November, net bank borrowings totalled 308.6 billion rupees compared to 29 billion rupees during the eight months to August.

Amid weak credit, excess liquidity generated from dollar inflows rose and the Central Bank was able to build up foreign reserves up to August. But in the last quarter of 2014 foreign reserves have started to fall as domestic credit picked up.

In the three months to November total borrowings by the state and state enterprises have totalled 156.5 billion rupees.

State enterprises have borrowed a total of 93.6 billion rupees in the three months to November despite low energy prices, indicating that they are either paying high taxes or are being hit by payment arrears from the state entities or others.

It is not clear whether the Ceylon Electricity Board, is still getting tax payer support to settle long term project loans or it is settling its own loans.

Up to August 2014 however state enterprises paid back 27 billion rupees on a net basis.

Total borrowings by SOE’s rose to 431.5 billion rupees in November from 337.9 billion rupees in August.





The energy ministry last week sharply cut fuel tariffs, the effects of which are not yet clear.

Heavy borrowings by state enterprises, despite falling energy prices may indicate that the central government deficits may be indirectly finance by payment arrears of heavy taxes on energy utilities.

State enterprises were also net borrowers by about 57 billion rupees in December 2013, on top of 42 billion rupees of credit in October and 53.2 billion rupees in September.

Meanwhile private sector credit also rose by 57 billion rupees the highest seen since the 60.2 billion rupees of new credit recorded in December 2011 at the height of a balance of payments crisis.

Private credit has risen 7.3 from a year earlier to 2,681.7 billion rupees, amid low interest rates. Sri Lanka’s Treasury bill yields are now at levels not seen since the 1970s.


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