Sri Lanka credit growth, import demand slowing: central bank

Mar 22, 2012 (LBO) – Private sector credit growth and import demand in Sri Lanka is slowing down in response to recent policy tightening, with downward pressure on the rupee expected to ease, the central bank said. Foreign currency inflows to the country increased “substantially” in recent weeks and more was expected, as projected in the Central Bank ‘Road Map’ unveiled earlier, it said in a statement.

The Central Bank said that in response to the recent policy measures restricting bank lending, “there are clear signs of deceleration in private sector credit growth and import demand.”

A further moderation is expected once seasonal demand for imports ahead of the traditional New Year festival in April is over, “thereby substantially easing the deficit in the trade account,” it said.

“The increasing foreign currency inflows, and the easing of the import demand are expected to stabilize the foreign exchange markets in the coming weeks.”

The statement came as the rupee dipped sharply against the US dollar, quoted at 130.50/ 131.00 Wednesday. It had slumped to a record low of 131.60 Monday.

The foreign currency inflows included net inflows to the stock market so far in 2012 of 164 million US dol