Sri Lanka’s credit to the private sector has expanded by Rs. 146 billion in the first half of 2024, with a notable increase of Rs. 74 billion in June alone, according to data from the Central Bank. This represents a 2% expansion in private credit for the first half of the year, which is lower than the 3.7% expansion recorded in the latter half of 2023.
The International Monetary Fund (IMF) projects a 7.2% expansion in private credit for 2024, following their second review of the year. The current expansion marks a significant recovery from the 4.2% contraction experienced in the first half of the previous year.
During a Monetary Policy briefing on the 24th of July, Central Bank Governor Dr. Nandalal Weerasinghe highlighted the repricing of the existing lending portfolio as lending rates have decreased. Loans with interest rates below 12.5% increased from 37% of the total outstanding lending portfolio at the end of 2022 to 60.6% by the end of June 2024. Conversely, loans with interest rates above 12.5% decreased from 63.1% to 39.4% over the same period.
Despite these improvements, approximately 20.8% of loans still have interest rates above 20.5%, and 14.1% fall between 15.5% and 20.49%. Dr. Weerasinghe noted that the repricing process is slower for long-term loans, such as housing loans.
The Average Weighted Prime Lending Rate (AWPLR) has decreased by about 3% in the first half of 2024, reflecting the overall decline in lending rates.