ECONOMYNEXT – Sri Lanka’s private credit picked up to 25 billion rupees in January 2020, from just 0.3 billion rupees in December, while central bank credit (printed money) was negative without counting the effects of a profit transfer from the monetary authority, official data show.
Sri Lanka’s rupee peg with the US dollar was stable until February 2020, when the first liquidity injections began.
In January 2020 credit to government 41.9 billion rupees, down from a119 billion rupees surge in January 2020.
State enterprises borrowed 12.6 billon rupees, taking the total credit from the banking system to the economy to 54.5 billion rupees, when central bank credit to government was a negative 26 billion rupees.
However in the last week of February a 24 billion rupees central bank profit was transferred to the finance ministry as a liquidity injection, which does not come up in credit data.
By the end of February the rupee peg was still intact.
Liquidity injections ratcheted up in March amid global market uncertainty, putting the currency under pressure and worsening capital flight and also raising fears about the ability to service foreign debt. (Colombo/May10/2020)