Sri Lanka business caught napping by war-end: senior banker

Oct 05, 2010 (LBO ) – Sri Lanka’s large enterprises were caught napping by the end of a 30-year war, and smaller firms which required less planning were first off the mark, a senior banker has said. The central bank had said that by July 2010 loans from commercial banks to the private sector rose 8.9 percent from a year earlier, while credit at finance companies which deal with more risky small borrowers were up 9.9 percent.

Sri Lanka’s lending and risk free rates shot up to around 20 percent in late 2008 as the country was gripped by a balance of payments crisis, which was ended with the signing of a stabilization deal with the International Monetary Fund.

Sri Lanka’s rupee interest rates are low by historical standards with the prime rupee lending rate around 9.9 percent on October 01 against 21.1 percent two years ago, according to central bank data.

Prudence

After the crisis ended Central Bank governor Nivard Cabraal lowered interest rates cautiously, allowing the monetary authority to build up foreign reserves and a deficit spending government to also borrow without creating too much inflation.

In 2009 the government ran a deficit of around 10 percent of gross do