Sri Lanka’s state owned enterprise borrowings have started to rise steadily from September 2016, which usually points to a deterioration in their finances, with December borrowings spiking sharply, official data shows.
The central government, private sector and SOEs together borrowed Rs116.5 billion from the banking system in December, up from Rs92.6 billion in November.
Private sector borrowings were Rs78.7 billion, slightly down from Rs81.2 billion a month earlier, and were in line with the levels seen earlier. Central bank credit (printed money) was also down to Rs413 billion from Rs417.3 billion by end-December. Although statistics show Central Bank credit down by year end, barely two days later, a large volume of government debt was repaid with printed money, causing liquidity to surge in the banking system and de-stabilising the monetary system. Central government borrowings from the banking system were low during the last quarter, before the printed money surge on January 02. Sri Lanka lost forex reserves on a net basis in January.
State enterprises that were paying back debt on a net basis up to September 2016 have been borrowings since then.
SOE borrowings fell from Rs527.6 billion in January 2016 to Rs441.5 billion in September amid low oil prices. But oil prices, which fell as low as $38 a barrel, have since moved back to above $53 a barrel.
The rupee has also continued to depreciate, in recent months like in the high inflation 1980s, fuelling a vicious cycle of inflation and energy SOE losses and credit demand, which can put further pressure on the credit system. ECONOMYNEXT
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