Sri Lanka’s private credit slows in April, SOEs up

ECONOMYNEXT – Sri Lanka’s private credit slowed in April 2015 to 14.5 billion rupees from 41.5 billion rupees a month earlier, with state and state enterprises continuing to borrow, official data showed.

Private credit however has a tendency to be slow in April amid a seasonal holiday in most years.

State enterprises borrowed 13.10 billion rupees, up 3.0 billion month earlier, and the Central Government borrowed 13.7 billion rupees in April, compared to a net payback in March.

Credit to the private sector was up 15.2 percent from a year earlier to 1,859.6 billion rupees in April 2015.

Credit to state enterprises were up 50.4 percent 497.8 billion rupees, indicating a sharp reversal in their fortunes over the past several months. Credit to central government was also up 17.3 percent to 1,626.8 billion rupees.

Central Bank credit, which is indicative of printed money was up 55.3 percent to 226.0 billion rupees. Central Bank credit injects liquidity in to the banking system and generates pressure on the rupee and forex reserve losses, when the liquidity is mopped through currency defence.

Sri Lanka has seen pressure on the currency and foreign reserve losses amid a deteriorating fiscal policy. In April policy rates were cut despite the sharp growth in credit, adding monetary fuel to the fiscal fire, analysts have warned.

(Colombo/July 06, 2015)

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