Oct 18, 2010 (LBO) – Credit to Sri Lanka’s businesses from commercial banks rose 12.6 percent in August 2010 to 1,226.5 billion rupees from a year earlier while credit to government fell, official data shows. Sri Lanka’s petroleum firms for example are taxed till they run losses and prices are politically controlled.
Growth in loans to private sector picked up from 8.9 percent in July. Sri Lanka’s central bank has been encouraging banks to lend to private businesses, but bankers say it took time for large companies in particular to formulate plans.
Central Bank Governor Nivard Cabraal has also urged banks to lend, but to well managed projects which banks are happy to lend to.
Credit to government fell 2.1 percent in August 2010 to 697.4 billion rupees from 712.3 billion rupees a year earlier. Central Bank credit to government was also down 6.5 percent in August to 113 billion rupees.
However central bank credit to government (printed money) spiked up mid-year raising concerns.
Meanwhile loans to state businesses were up steeply by 194 percent to 106.4 billion rupees. In Sri Lanka state businesses run large losses and indirectly bear budgetary losses.