State credit...

STATE CREDIT EASED IN MAY

Reversing the trend, credit to the public sector in May saw a decline by around Rs.6.2 billion, allowing for more private sector borrowing.

Releasing the July monetary policy, the Central Bank said this decline was supported by the deceleration in credit growth to the government and the decrease in credit utilized by the major public corporations on account of part settlement of dues.

Besides, the price adjustments brought to administer energy prices have also helped to increase the revenues of Ceylon Petroleum Corporation and the Ceylon Electricity Board.

Favorable weather has also helped to reduce the thermal power generation thereby reducing the fuel bill, which was also reflected in the recent months’ external account.

“Further improvements in the public sector performance are expected to release funds from the banking sector to provide additional stimulus to increase private sector activity,” the Central Bank said.

The slowing down of public borrowing has served well for the private sector that had been crowded out. The credit to the private sector grew by Rs.18.3 billion in May, increasing from Rs.7.6 billion in April.

The broad money supply (M2b) in May increased to 16.3 percent from 15.2 percent in April. The projected M2b supply by the end this year is 15.0 percent compared to 16.2 percent in December 2012.