Sri Lanka private sector credit slows, spike in state credit

June 20, 2008 (LBO) – Sri Lanka’s private sector credit had slowed to 15.1 percent by April 2008 following tight monetary policy, though state credit had spiked in that month, but inflation would slow after July, the Central Bank said. Till August 2007, credit to private sector has been growing at a rate of 25 to 26 percent, but it fell to 15.1 percent in April.

“The recent surveys on the distribution of credit indicate that the deceleration has mostly arisen from less productive areas such as consumption, thereby lessening any impact on the growth potential,” the Central Bank said Friday.

“Credit utilised by public corporations, which continued to expand at a high rate till early 2008 has also recorded a turn around with credit absorption declining to significantly lower levels during the February – April period.

“However, there has been a slight upward movement in the expansion of broad money in April due to higher than expected utilisation of credit by the government during the festive season, which is expected to be adjusted during the subsequent months.”

Sri Lanka’s inflation, measured on a revised Colombo Consumers Index whose weights were changed after prices rose 29.9 percent in the 12-months to April, w