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Sri Lanka SOE, govt credit surge in Jan 2021, private down

ECONOMYNEXT – Sri Lanka’s credit to government and state enterprises surged in January 2021 but private credit fell, official data showed in a month that the rupee fell sharply after interventions kept the peg stronger in the last week of December.

The central bank printed 55.4 billion rupees in January 2021, after printing 69.4 billion rupees in December 2020.

Total credit to the government from the banking system was 209.9 billion rupees in January 2021 up from 187.7 billion rupees in December.

Credit to state enterprises rose by 55.9 billion rupees, reversing from a contraction of 8.3 billion rupees a month earlier.

SOEs dollar borrowings rose sharply to 446.9 billion rupees in January 2021 from 417.9 billion rupees a month earlier, while borrowings from domestic banking units (rupees) rose to 611.2 billion rupees from 584.3 billion rupees a month earlier.

The official month-end spot US dollar rate published by the central bank fell to 194.39 million dollars in January 2021 from 186.40 to the US dollar in December.

When the rupee had come under pressure from money printing in the past, a favourite tactic of the authorities had been to force the Ceylon Petroleum Corporation to borrow dollars from state banks and run an unhedged dollar position.

The borrowings are then used to settle oil bills, and the loan triggers a big loss as the rupee falls and adds to public sector debt.


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In 2018 such actions made the CPC run an 80 billion rupee forex loss despite having a price formula to collect rupees and crowd out private consumption.

In January reserve appropriations were also made to repay foreign debt. (Colombo/Mar01/2021)

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