Sri Lanka credit hits new high in October

Credit to business grew 33.4 percent in the 12-month to October from a year earlier, easing slightly from 34.8 percent in September, but the monthly volume was the highest since the end of a balance of payments crisis in 2009.

Credit to business has been above 50 billion rupees for three months in a row.

Credit to state enterprises also rose 20.2 billion rupees to 161.2 billion, up 31.2 percent from a year earlier, data released by the Central Bank shows.

Net rupee credit to the state from commercial banks fell 16.4 billion rupees to 484.4 billion in October and dollar denominated credit also fell 5.3 billion rupees to 126.3 billion rupees.

But central bank credit to the state rose 16.4 billion rupees to 178.8 billion rupees.

Central Bank credit to the state rises due to sterilizing interventions in the forex markets to defend a peg with the US dollar with rupee liquidity injections or settling foreign state loans.

Sri Lanka has been defending a dollar peg which came under pressure due to a delayed increase in interest rates and a liquidity build-up from state foreign borrowings.

In November the peg which was at 113.90 to the US dollar in the spot market was broken (devalued) and set at 113.90 rupee where it continues to be defended.

Sri Lanka's foreign reserves fell 12.3 percent or 1,003 million dollars to 7,095 million dollars by end September 2011, from a peak of 8,098.80 million dollars in end August.

Update II