Sri Lanka private sector credit up in November

Jan 18, 2010 (LBO) – Sri Lanka’s private sector loans surged 11.7 billion rupees to 1,188 billion in November 2009, as rates fell to levels that stimulated credit demand, central bank governor Nivard Cabraal said.

The Central bank has also pushed banks to lend in former war torn northern and eastern areas approving new branches and giving re-finance from rural credit schemes administered by the monetary authority.

State run Bank of Ceylon said demand for small business loans in fishing and agriculture was surging. Farm gate prices in the region rose after a highway linking the area to the rest of the country was opened.

The central bank is expecting economic growth to double to 7.0 percent in 2010 after falling to an estimated 3.5 percent in 2009.

“We have a goal of increasing per capital income,” Cabraal said. “We have to increase lending also. More and more industry and services will start requiring capital.”

Deficit Spending

Sri Lanka’s interest rates have been historically high and growth low due to heavy borrowings to finance a profligate, deficit spending government. Almost all capital expenditure is financed from foreign borrowing.

The Central Bank frequently comes