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Thursday September 29th, 2022

Sri Lanka private credit negative in July, credit to government surges

ECONOMYNEXT – Sri Lanka’s private credit was negative for the third straight month in July 2020, contracting 3.6 billion rupees, while credit to government and state enterprises surged, official data show.

Banks loaned 172 billion rupees to the government in July 2020, up from 133 billion rupees in June central bank data showed amid as tax revenues fell due to a combined effect of a pre-Coronavirus ‘stimulus’ and post-crisis lockdowns and a slowdown.

State enterprises borrowed 31.3 billion rupees, taking the total to 982.6 billion rupees. Credit to state enterprises grew 34.7 percent in the 12-month to July from 30.3 percent in June.

Sri Lanka has controlled the spread of Coronavirus, allowing economic activities to resume, but there are import controls due to money printing and a more focused import substitution strategy.

Credit to government rose to 38.1 percent to 3,734 billion rupees in July 2020 from 33.5 percent in June.

Private credit growth in the 12-months slowed to 4.2 percent or 5,830.4 billion rupees, from 4.3 percent in June.

Central bank credit to government contracted by 6.7 billion rupees, indicating that new money has not been printed for two months.

However excess liquidity levels from previous printing as well as some recent dollar purchases are high.

Excess liquidity taken by the government and spent could put renewed pressure on the currency, though private credit is negative.

Total credit from the banking system in July grew by 199 billion rupees in July from 78.5 billion rupees in June. (Colombo/Sep03/2020)

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