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Last Updated : 2024-04-29 15:40:00
The private sector credit, a key gauge of economic dynamism in the country picked up pace during March, marking the third month in raw such credit grew, in a sign of reactivating ‘animal spirits’ in the economy ahead of the New Year.
Data showed that the licensed commercial banking sector expanded its total outstanding private sector credit by as much as Rs.112.2 billion in March, accelerating from Rs.79.4 billion in February as banks re-opened their lending spigots after building capital and liquidity buffers for more than a year.
The Sri Lankan banking sector built enormous amount of excess liquidity during 2020 as people and businesses parked their cash in banks amid subdued growth in loans.
Meanwhile, banks on their own accord raised capital by way of equity and debt to build more heft in their liquidity, building their readiness to face a flux in demand for loans sparked by the lowest interest rates on record.
As the banking sector kicked off their March earnings season last week, they were seen releasing such liquidity into the markets by way of loans and advances, generating heightened activity in the economy.
With March private sector credit, the licensed commercial banking sector had Rs.6,388.2 billion in total outstanding private sector credit by the March- end. This marks 7.5 percent growth from a year ago level, although it was slightly down from 7.8 percent a month ago, measured based on February-to-February levels between the two years.
Sri Lanka has set a target of 14 percent to grow its private sector credit in 2021 from 2020 levels, which translates too little over Rs.850 billion.
During the first three months, the banking sector expanded outstanding private loans by Rs.217.3 billion, marking an achievement of one quarter of the total credit earmarked for the entire year, indicating that the full year target is within reach.
However, the restrictions being re-imposed on certain key economic activities citing the rising virus infections and sporadic isolations being re-imposed on certain areas could derail this growth as that kills the spirit for consumption, businesses and investments, which in turn generate jobs and incomes for people and the government.
Those who call for restrictions, majority being fixed salary earners in the unproductive public sector, have no idea whatsoever that their sustenance almost entirely depends on a working economy, which is almost entirely powered by the country’s private sector.
The public sector, which overused COVID-19 as a default excuse for an year to hide their inefficiency has again received a lifeline to extend the same excuse for another year, while the country and its systems are rotting to their core.
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