Sri Lanka private credit rises by Rs789bn in 2024

⭕ Sri Lanka 🇱🇰 private credit expanded by 789.6 billion rupees in 2024, compared to a 47.7 billion rupee contraction in 2023.

⭕ Out of the 789 billion rupees of annual private credit, 583 billion rupees came in the last five months of the year.

⭕ In December, private credit was 193 billion rupees, up from 71 billion rupees in October and 19 billion rupees in November.

⭕ The cost of an investment in Sri Lanka 🇱🇰 is now at least 50 percent higher due to the devalued rupee, with the exchange rate now at 300 to the US dollar.

⭕ Private credit has to be crushed in part to finance the government deficit, which soars as the stabilization crisis starts, requiring steeply higher interest rates and taxes.

⭕ Concerns were raised around October about inflationary open market operations resuming, injecting large volumes of excess liquidity to banks, which then end up in the forex market.

⭕ The central bank mopped up large volumes of liquidity from dollar inflows overall in 2024, re-building foreign reserves, until its Treasury bill holdings ran out.

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