In January 2024, Sri Lanka witnessed a significant decrease in private credit by 52.2 billion rupees, following increases in December and November of the previous year. This fluctuation came amidst a backdrop of rising imports and a value added tax hike anticipated in December, suggesting a spike in credit was linked to consumption imports expected to normalize as goods were sold. Central bank credit reduced by 91 billion rupees in January, contributing to monetary stability and supporting a balance of payments surplus, contrasting with its increase in December. This reduction is part of the central bank's broader strategy to manage monetary stability, despite criticism over its operational framework and reliance on standing facilities without penalty rates. Additionally, credit to state-owned enterprises (SOEs), including the Ceylon Electricity Board (CEB), fell. The CEB, which became profitable and began settling debts, reduced tariffs in March. Net credit to the government increased, driven by commercial bank credit, indicating a complex financial environment shaped by efforts to stabilize the economy amid external pressures and policy shifts advocated by entities like the International Monetary Fund.

https://economynext.com/sri-lanka-private-credit-down-in-jan-2024-154922/