Sri Lanka government credit down; concern over petro borrowing: central bank

Mar 19, 2008 (LBO) – Central Bank credit to Sri Lanka’s government was down, money supply growth was falling but state enterprise borrowings was a concern, the island’s monetary authority said in its March policy statement. Growth in private sector credit had fallen to 18.3 percent while credit to the government from the banking sector has fallen by 10.5 billion rupees in the month.

“However, the increased utilisation of credit by public corporations, particularly the Ceylon Petroleum Corporation in the face of rising international oil prices, remains a concern,” the Central Bank said.

The monetary authority has been keeping policy tight for over two months and selling down its holdings of Treasury bills on a net basis to sterilize money generated from exchange rate interventions.

Quantity Targets

The monetary policy statement made no mention of policy rates, which have not been raised for more than a year. However, interest rates are now largely market driven.

It no longer targets interest rates and allows rates to fluctuate between a band of 12 to 19 percent through two discount windows with restricted access. However overnight rates occasionally spike above the ceiling.

But the bank