Hunky Dory

Sept 27, 2008 (LBO) – Sri Lanka’s central bank has disputed as ‘misleading’ a statement by a rating agency that the country’s macro-economic conditions were weak, amidst rising bad loans in banks, the highest inflation in recent history and falling profits of companies. Government revenue had increased 24.2 percent to 312.5 billion rupees in the first six months of the year with taxes up 22.6 percent. Meanwhile expenditure grew by 22.5 percent to 476.6 billion rupees.

The central bank said subsidies, especially in fertilizer and interest payments drove current expenditure, while roads, power and irrigation projects drove capital expenditure.

Government debt fell to 85.8 percent of GDP in 2007 and was expected to fall further.

The central bank itself was maintaining tight monetary policy to contain inflation and promote sustainable economic growth. Policy was tightened twice during the year. Reserve and broad money was falling.

Credit to private sector had slowed to 12 percent and inflation had fallen to 24.9 percent. Central Bank expected inflation to fall further, which was expected to improve “the current macro-economic environment further.”

Finance companies

The Central Bank said registered finance companies (RFCs) represented on