Sri Lanka’s private credit up in November, state credit down

ECONOMYNEXT – Sri Lanka’s private credit grew 47.1 billion rupees in November, the fourth month of positive credit, while government borrowings were negative, official data showed.

Credit to government from commercial banks fell by 9.1 billion rupees to 2,369.7 billion rupees, while central bank credit also fell to 332.4 billion rupees, down from 349.9 billion rupees a month earlier.

Concerns have been raised that credit to state may spike after taxes were cut in December, but the Finance Ministry has said it is cutting spending and will manage the deficit around, 5.5 percent of gross domestic product.

The central bank bought 88 million US dollars in November, amid weaker state credit, after also purchasing some dollar a month earlier. Dollar purchases help permanently fill a liquidity short in the market, generated by earlier interventions.

Sri Lanka started injecting liquidity and reversed earlier policy around July, putting pressure on the rupee amid strong private credit spike in June.

Credit to state enterprises grew 14 billion rupees. SOE credit was up for the fourth month in a row.

Sri Lanka has abandoned a price formula for fuel. SOE credit has spiked in the past, when fuel prices rose. (SB-Colombo/Dec30/2019)

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