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Thursday December 9th, 2021
Economy

Sri Lanka CB sees private sector credit growth at 14-pct by end 2021

ECONOMYNEXT – Sri Lanka’s private sector credit growth is expected to slow to around 14 percent year-on-year from August’s 15.1 percent, a top central bank official said on Thursday, after the central bank left the key monetary policy rates unchanged following the rate hike in August.

The 15.1 percent year-on-year private sector credit growth in August was the highest percentage growth since January 2018 and banks have lent 134.1 billion rupees in the month, highest since the central bank data available from August 2016.

“We have seen a substantial increase in the private sector credit,” Chandranath Amarasekara, the director at the central bank’s economic research department, told reporters Thursday.

“By the end of this year, we expect the banking sector to release about 850 billion rupees as private sector credit and the credit growth is expected to be about 14 percent by end of this year.”

The central bank maintained record low policy rate regime printing large volumes of money since mid last year to stimulate the Covid-19 pandemic hit

When the printed money turns into imports through private credit, forex shortages take place. By July 2021, imports were higher than 2019, when Sri Lanka also got tourism receipts.

Related

Sri Lanka imports soar to 17-month high in July 2021 amid money printing, exports

Te central bank held its policy rate, at which money is injected to the banking system at 6.0 percent on Thursday after raising it by 50 basis points in August, as the balance of payments shattered from the liquidity injections, triggering record deficits.

Central bank governor Ajith Nivard Cabraal said the policy rate decision on Thursday was to keep the credit growth momentum going.

“We don ‘t need to dampen that. Neither do we want to stimulate it any further,” Cabraal told reporters.

“That’s the reason we at the Monetary Board decided to keep the rates steady and we believe that’s the most appropriate stance for the time being.” (Colombo/Oct14/2015)

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