Govt. borrowings pick up, credit to private sector eases

New loans to private sector Jan-Oct ’12: Rs. 310.5bn



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Private sector borrowings from the domestic banking sector have eased in October 2012 while government borrowings have surged, latest data released by Central Bank data showed.


Domestic bank credit extended to the private sector eased to Rs. 19.4 billion in October 2012 from Rs. 29.3 billion a month earlier. New loans to the private sector generated during the first ten months of this year amounted to Rs. 310.5 billion. New loans generated in 2011 amounted to Rs. 487.7 billion and Rs. 290 billion in 2010.


Central Bank credit to the government declined Rs. 12 billion in October, brining down the value of new loans during the ten-month period to Rs. 57.3 billion.


Government borrowings from the domestic banking sector surged by Rs. 22.6 billion in October after some moderation in the proceeding few months. New loans to the government from the domestic banking sector reached Rs. 116.2 billion during the first ten months of this year.


Outstanding net credit to the government from the Central Bank reached Rs. 320 billion as at end October 2012, up 81 percent from a year earlier. Net credit from the domestic banking sector grew 21.6 percent year-on-year to Rs. 589 billion, while credit from foreign banking sources grew 5.9 percent to Rs. 133.7 billion.


Outstanding net credit to public institutions from the domestic banking sector grew a marginal 1 percent year-on-year to Rs. 70 billion as at end October 2012. Credit from foreign banking sources grew 100.9 percent to Rs. 184.6 billion.


Net credit to the private sector from domestic banks reached Rs. 2,132 billion as at end October 2012, up 25.1 percent from a year earlier. Credit from foreign banking sources grew 7.8 percent to Rs. 192.5 billion.


The Central Bank last week in a surprise move eased monetary policy by 25bps and said the 18 percent credit growth ceiling imposed on domestic banks would be lifted by the end of this year.


Analysts were taken by surprise because the government’s fiscal performance has gone off target with heavy domestic borrowings, relying on captive sources such as the Employees’ Provident Fund and National Savings Bank.


The budget deficit as a percentage of GDP for the first nine months of this year reached 6.44 percent, exceeding the full year’s target of 6.2 percent, as government expenditure grew nearly twice as fast as revenue growth, latest data released by the Central Bank showed.


The government’s total outstanding debt stock as at end September reached Rs. 6,262 billion, an increase of 23.52 percent from a year earlier. Domestic debt grew 16.15 percent to Rs. 3,280.4 billion while foreign debt grew 32.79 percent to Rs. 2,981.5 billion.


Total outstanding government debt grew by Rs. 1,128.6 billion during the first nine months of this year. According to the 2012 budget, the government’s borrowing limit for the full year is Rs. 1,104 billion.


According to the 2012 budget, the government’s debt requirement for 2012 was Rs. 776.2 billion from domestic sources and Rs. 327.8 billion from external sources. However, by end September 2012, the domestic debt component grew by Rs. 476.2 billion from end December 2011 while foreign debt increased by Rs. 652.2 billion.


Meanwhile, Sovereign ratings agency Standard and Poor’s releasing a summary analysis on Sri Lanka last week said the sovereign credit rating on Sri Lanka was constrained by weak external liquidity, moderately high external debt, fundamental fiscal weaknesses, the attendant high public debt and interest burden, and political institutions that, in some cases, lack transparency and independence.


 
 
 
 
 
 
 
 

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