Loan Growth

Dec 21, 2010 (LBO) – Sri Lanka’s credit to business from commercial banks surged 20.3 percent in October 2010 from a year earlier, as 50 billion rupees in new loans were made in the month, the highest since a balance of payments crisis two years ago, official data show.

Loans to private business rose 50.3 billion rupees to 1,412.9 billion rupees in October with rupee denominated loans rising 45.3 billion rupees to 1,256.7 billion rupees.

Loans from foreign exchange banking units rose 5.2 billion rupees to 156.3 billion.

Loans to the government from the banking system, including the central bank, fell steeply by 36.6 billion rupees to 565.5 billion rupees as the government repaid credit following a billion dollar sovereign debt sale.

Credit from the Central Bank to government fell 15 billion rupees to 85 billion rupees.

Credit from the central bank to government (printed money) is the key reason for inflation and balance of payments troubles in Sri Lanka, forcing the country to suffer higher inflation that the anchor US currency the rupee is firmly pegged to.

In 2009 Sri Lanka’s loans to private business contracted as the government ran a deficit of around 10