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Credit to the Sri Lankan government and public corporations continues to overshadow credit to the private sector for the seventh consecutive month.

In a surprising trend, the amount of credit given to the Government of Sri Lanka (GoSL) and public corporations has surpassed credit given to the private sector for the seventh consecutive month, according to data released by the Central Bank of Sri Lanka (CBSL) on Friday, April 8, 2022. This phenomenon has not been observed since 1989, almost 33 years ago.

In February 2022, credit to the GoSL and public corporations reached Rs 7,331 billion, while credit to the private sector was only Rs 7,051 billion, resulting in a difference of Rs 280 billion. Similarly, in January 2022, credit to the GoSL and public corporations amounted to Rs 7,236 billion, surpassing credit to the private sector by Rs 219 billion.

The trend continued in December 2021, with credit to the GoSL and public corporations reaching Rs 7,467.9 billion, compared to Rs 6,981.4 billion for the private sector, a difference of Rs 486.5 billion. In November 2021, credit to the GoSL and public corporations was Rs 7,259 billion, while credit to the private sector was Rs 6,920.1 billion, a difference of Rs 338.9 billion.

This pattern can be observed in the months of October, September, and August 2021 as well. In October, credit to the GoSL and public corporations amounted to Rs 7,116.8 billion, while credit to the private sector was Rs 6,859.6 billion, a difference of Rs 257.2 billion. In September, credit to the GoSL and public corporations reached Rs 6,915.2 billion, surpassing credit to the private sector by Rs 90.6 billion. In August, credit to the GoSL and public corporations amounted to Rs 6,819 billion, while credit to the private sector was Rs 6,795.5 billion, a difference of Rs 23.5 billion.

Interestingly, a similar trend was observed for 10 consecutive months from January 1989 to October 1989, as shown by CBSL data. This coincided with significant political events, including the election of President Ranasinghe Premadasa in December 1988 and the subsequent retirement of President J.R. Jayewardene. The period also saw the IPKF fighting the LTTE in the North and East of the country, as well as the JVP fighting the GoSL in other regions.

However, the situation shifted in November 1989 when JVP leader Rohana Wijeweera was killed by the Army. From that month onwards, credit to the private sector began to surpass credit to the GoSL and public corporations. This trend continued for nearly 32 years until August 2021, when credit to the private sector once again took a backseat to credit given to the GoSL and public corporations. The latest CBSL data confirms this trend up until February 2022.

This shift in credit allocation raises questions about the dynamics of the Sri Lankan economy and the priorities of the government. It remains to be seen how this trend will evolve in the coming months and what implications it may have for the private sector and overall economic growth.