Shrinking Credit

April 02, 2009 (LBO) – Sri Lanka’s private sector credit is shrinking with credit card users also falling for two straight months as an economic slowdown begins to bite, the latest official data show. Credit from central bank to the government rose to 244.5 billion rupees in January 2009, from 217.4 billion rupees a month before.

Total bank credit to government increased to 625 billion rupees in January from 572 billion rupees in December 2009.

Sri Lanka is now negotiating a bailout package from the International Monetary Fund which is expected to put a ceiling on central bank financing of government (printing money) in a bid to arrest the balance of payments crisis. Sri Lanka’s private sector credit which peaked at 1,278 billion rupees in December 2008 fell to 1,264 billion rupees in January 2009.

Credit card holders in the island had fallen for two straight months.

By end-November 2008 credit card users totaled 923,758. By end-December total active credit cards had fallen to 917,418. In January card holders slipped further to 912,950.

Outstanding credit fell to 33.9 billion rupees in January 2009 from 34.2 billion rupees a month earlier.

Sri Lanka’s central bank has lo