Credit growth slowing, Central Bank Governor says

Thursday, 7 July 2016 00:00 - - {{hitsCtrl.values.hits}}

Reuters : Sri Lanka’s private-sector credit growth is slowing, after monetary tightening earlier this year, the central bank’s new Governor said on Tuesday.

Credit growth rose to near a four-year high in April of 28.1% from a year earlier, accelerating from March’s 27.7%, despite monetary tightening measures in December and February.

Markets have been worried rising inflation and high credit growth will lead to further tightening.

“We see credit growth coming down,” Dr Indrajith Coomaraswamy told his first meeting with the media in Colombo. He did not elaborate on the credit growth after April.

“We still haven’t seen the full effects of what has already being done. Now the slight spike in inflation is partly due to one-off things like the VAT (value added tax).”

The bank is monitoring the situation closely, but sees no urgent need to do anything, Dr Coomaraswamy said.

The International Monetary Fund on 3 June said further tightening could be needed depending on credit and inflation developments.

May consumer prices rose to a 32-month high after the government increased VAT to help restrain a soaring budget deficit, while core annual inflation rose 6.4% from a 38-month high of 6.6% in May.