Sri Lanka saw funds flowing into priority and productive segments of the economy before the virus restrictions disrupted the flow, the Central Bank data available through March-end, showed.

“We saw an acceleration in personal loans and advances from the middle of 2020 and that has stabilised in the first quarter of 2021, whereas there has been an acceleration in credit towards agriculture, services and industrial sectors. That is quite encouraging. As we have expected the credit continues to move towards the more productive segments of the economy,” said Central Bank Economic Research Department Director Dr. Chandrananth Amarasekara. 

The personal loans and advances grew by 14.9 percent in March 2021 from the same period last year, reflecting the consumption surge witnessed in the economy during the first three months, albeit a deceleration from 15.1 percent in December 2020. 

Sri Lanka’s economy was off to a robust start in the first quarter, predominantly driven by consumer spending, as the people went about their lives with the ease of virus-related restrictions.

Consumer spending accounts for more than two-thirds of the Sri Lankan economy and the current round of restrictions are heavily weighing on the country’s output.

In order to redirect lending to sectors identified as priority according to the government’s economic policy, the Monetary Board issued priority sector lending targets to banks to rev up credit flows to these selected sectors in rebuilding the domestic production and export economy. 

At broader level, the banks are also required to assign a minimum of 20 percent of their fresh lending to the micro, small and medium enterprise sector in 2021.  

Meanwhile, after languishing at 3.9 percent in December 2020, loans to agriculture and fishing accelerated to 8.9 percent in March 2021 from a year ago. 

The industry sector registered a growth of 6.2 percent, compared to 4.7 percent in December 2020, while the services sector, which lagged at 1.4 percent in December 2020, grew by 3.6 percent in March 2021 from the same month in 2020.