Private sector borrowings in Sri Lanka slowed in July 2025, with new credit demand easing compared to the previous month, though total outstanding borrowings continued to rise beyond Rs. 9.5 trillion.
Sri Lanka’s private sector credit growth eases despite high demand
Private sector borrowings in Sri Lanka recorded slower growth in July 2025, according to the latest data from the Central Bank of Sri Lanka (CBSL). Total private sector borrowings rose by Rs. 201.5 billion during the month, pushing the outstanding amount past Rs. 9.5 trillion for the first seven months of the year. However, this figure was lower than the Rs. 221.5 billion recorded in June, indicating a moderation in credit growth.
CBSL data shows that domestic banking sector credit to the private sector in July amounted to Rs. 192.7 billion, reflecting a 20.7% year-on-year increase. Despite this growth, the previous month recorded a higher Rs. 210.5 billion in credit, although the annual growth rate was slightly lower at 17.9%.
Private sector borrowings in July ranked as the second-highest monthly figure this year, behind June. Seasonal trends also played a role in shaping credit demand, with April showing a low of Rs. 87 billion due to the Sinhala-Tamil New Year holidays. February recorded Rs. 105 billion in credit demand, while January experienced a reduction of Rs. 4.6 billion following December 2024’s high of Rs. 193 billion.
The CBSL’s Willingness to Lend Index, released in August, showed continued optimism in the banking sector, with the indicator maintaining a nine-quarter upward trend and reaching a five-quarter high in Q2 2025. The CBSL noted that favorable liquidity conditions, economic recovery, and a positive outlook are likely to sustain this trend in Q3 2025. Nonetheless, the Index value is projected to fall from 59.6 in Q2 to 41.4 in Q3, remaining below the values seen in the past three quarters and Q4 2024.
Government borrowings in July 2025 remained minimal at Rs. 9.5 billion, bringing the total outstanding amount to Rs. 6.61 trillion, an increase of 5.3% from a year earlier. In contrast, domestic banking credit to public corporations dropped by Rs. 33.8 billion during the same month, with outstanding credit declining to Rs. 550.3 billion, reflecting an 11% year-on-year decrease.
The data highlights a mixed trend in Sri Lanka’s private sector borrowings, where overall credit levels remain high, but the pace of monthly growth has slowed. While demand from the private sector continues to drive lending, the slowdown in July suggests a cautious outlook as both businesses and banks adjust to evolving economic conditions.