
Record Rs. 221B Private Credit Surge in June Raises Stability Concerns
- CNL Reporter
- August 9, 2025
- News
- Private Credit Surge
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Sri Lanka’s private credit expanded by a record Rs. 221 billion in June 2025, the highest monthly increase in history, driven by a rebound in private investment, improved fiscal discipline, and the effects of a recent policy rate cut, official data show.
The June figure surpassed the previous peak of Rs. 193 billion in December 2024. Analysts warn, however, that if credit growth—particularly investment-related imports—is financed through central bank liquidity rather than real deposits, it could strain foreign reserves and trigger balance of payments (BOP) pressure.
The Central Bank’s deflationary stance and a stable exchange rate have helped keep prices, including construction materials, steady or lower, boosting disposable incomes and supporting investment. Private sector borrowings in the first half of 2025 reached Rs. 700 billion, far exceeding central government borrowings of Rs. 178.4 billion.
Despite moderate government capital spending, concerns remain over potential fiscal overspending and “late-cycle” rate cuts—similar to those in 2012, 2016, 2018, and 2019—that previously led to BOP stress and higher foreign debt. Analysts caution that undermining stability for short-term growth could repeat past mistakes, risking currency trouble, economic contraction, and political instability.
Sri Lanka’s private credit expanded by 221 billion rupees, the highest in history for a single month in June 2025, official data show, driven by recovering private investment, better budgets but also a late-cycle rate cut, where concerns have been raised.