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Mon, 30 March 2015 11:18:03
Sri Lanka credit to business up in Oct
17 Dec, 2012 07:17:13
Dec 17, 2012 (LBO) - Sri Lanka's credit to private businesses rose 29.5 billion rupees to 2,324.4 billion rupees in October 2012 from a month earlier as loans to state enterprises fell by 17.3 billion rupees to 254.6 billion rupees, official data shows.
Dollar credit to private business, which fell from the equivalent of 201 billion rupees to 182.3 billion rupees in September rose by 10.2 billion rupees to 192.5 billion rupees in October, data published by Sri Lanka's central bank showed.

Credit to the central government rose 7.6 billion rupees to 1,042 billion rupees with new commercial bank loans outstripping a contraction in Central Bank credit.

Total credit extended to the state and business was about 19.8 billion rupees in October with net repayments from state enterprises.

In the first half of the year total loans including central bank credit rose above 100 billion rupees a month as large volumes of money was pumped into the banking system by the monetary authority to sterilize forex sales and trigger balance of payments pressure.

Since about May Sri Lanka's banking system has been showing volume trends seen before a balance of payments crisis started in the second half of 2011.

Before sterilized forex sales began, credit to private business ranged between 25 to 35 billion rupees a month.

As money was injected to the banking system through Treasury bill purchases by the Central Bank, loan to deposit ratios deteriorated and private credit volumes rose to 50 to 60 billion rupees a month, creating unsustainable import demand.

In February 2012, interest rates were eventually raised, state enterprise credit contained by an energy price hike and the rupee allowed to fall in line with printed money, ending contradictory exchange and monetary policies.

Growth to credit to private sector fell to 23.5 percent in the 12 months to October from 25.5 percent in September. Credit to government accelerated to 32.4 percent from 30.0 percent a month earlier.

Annual growth in credit to corporations slowed to 58 percent in October from 92.9 percent in September.

Update II

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