CREDIT TO GOSL, CORPORATIONS, OVERTAKE PVT. SECTOR

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 Rupee or domestic credit extended by Sri Lanka’s banking and monetary sectors to the Government of Sri Lanka (GoSL) and to public corporations continued to overshadow credit given to the private sector for the eleventh consecutive month to June 2022, a phenomenon last seen 39 years ago in July 1983, Central Bank of Sri Lanka (CBSL) data of Friday (29 July) showed. The private sector and not the GoSL and its agents (public corporations), is considered as being the engine of growth.

Previously, such a phenomenon occurring for 11 consecutive months or more which took place for a total of 31 consecutive months during the period January 1981 to July 1983, where, domestic credit extended by the local banking sector together with the monetary authorities, cumulatively, to GoSL and to its allied agencies such as public corporations were greater than such domestic credit cumulatively extended towards the private sector. 

That prior era was the period the multibillion rupee accelerated Mahaweli Development Project which dominated the socioeconomic landscape of the country then, where counterpart funding from the GoSL was needed to part match foreign funding, which came in the way of grants and concessional aid for this Project, hence inflating domestic credit extended to the GoSL and its agents, compared with such credit extended to the private sector during that period.

But in the present era, where this cycle is being repeated after a lapse of 39 years , is due to consumption and not due to development, largely led by the lack of revenue in GoSL’s coffers, leading to trillions (1,000 billions) of rupees of money printing to fill this shortfall.

Meanwhile, in the present era, domestic credit to the GoSL together with public corporations accelerated by 8.24 per cent (Rs 692.5 billion) to Rs 8,406.4 billion in June 2022; while credit to the private sector lagged behind at Rs 7,713.9 billion, showing that the gap between credit to GoSL and to its corporations vis-a-vis credit to the private sector amounted to Rs 692.5 billion in June 2022, CBSL’s Friday’s data showed.

In related developments, in the previous month May 2022, domestic credit to the GoSL together with public corporations relative to the acceleration seen in June 2022 decelerated by six per cent (Rs 494.7 billion) to Rs 8,249.1 billion in May 2022; with credit to the private sector lagging behind at Rs 7,754.5 billion, showing that the gap between credit to GoSL and to its corporations vis-a-vis credit to the private sector amounted to Rs 494.7 billion in May 2022.

In like developments in April 2022, credit to the GoSL and to public corporations in total amounted to Rs 8,273.5 billion; while credit to the private sector amounted to Rs 7,752.5 billion, showing a gap between credit to GoSL and to its corporations vis-a-vis credit to the private sector, of Rs 520.6 billion.

And, in March 2022, credit to the GoSL and to public corporations in total amounted to  Rs 8,090.7 billion; while credit to the private sector amounted to Rs 7,529 billion, showing a gap between credit to GoSL and to its corporations vis-a-vis credit to the private sector,  of Rs 561.7 billion.

In  similar developments, in February 2022, the comparative figures of credit to GoSL and its allied corporations amounted to Rs 7,331 billion, while credit to the private sector amounted to a mere Rs 7,051 billion that month, the former being more by
Rs 280 billion over the latter.

And in the previous month January 2022, credit to the GoSL and to public corporations amounted to Rs 7,236 billion, while credit to the private sector amounted to a mere Rs 7,017 billion that month, the former being more by Rs 219 billion over the latter. 

By Paneetha  Ameresekere