ECONOMYNEXT – Sri Lanka has seen loans crowding in to private sector with an expansion, as improved fiscal conditions have resulted in less demand for borrowing from the public sector, Central Bank Governor Nandalal Weerasinghe said.
The monthly credit to public cooperation and state owned firms has been steady around 650 billion rupees in the past eight months through March this year, while the monthly credit to private sector has expanded to 8,430 billion rupees in March from 7,708 billion rupees in August last year.
The year-on-year private sector credit has expanded by around 14 percent in March this year from a contraction by end 2023.
Governor Weerasinghe said the credit growth was not something the Central Bank is targeting.
“What you need to look at is much broader money supply including the credit to the private sector and public sector. When you look at that, it is relatively stable,” he told reporters at the post monetary policy review media briefing in Colombo.
“But what has happened basically private sector credit – banks are moving their resources more towards the private sector because their exposure to the public sector and government is coming down because of improving fiscal conditions as well as state owned enterprise operations.”
“So there is a less demand for credit from the public sector. As a result, there is a nice crowding in to the private sector. That’s how we see the increase.”
“But in terms of credit to GDP, still there is a lot of space. The private sector credit growth will support some of the recovering sector.” (Colombo/May 23/2035)
