Prime Lending Rate spikes to 25.68%

Growth of credit to private sector on a declining trend

Average Weighted Prime Lending Rate (AWPR) for the week ending 19th August 2022 increased by 37 bps to 25.68 per cent compared to the previous week, according to Weekly Economic Indicators of the Central Bank. In this backdrop, growth of credit to the private sector is on a declining trend, according to the Central Bank. It reflects the impact of significantly high market lending rates and moderation of activity

Meanwhile, reserve money which decides the level of liquidity and price level in the economy had increased compared to the previous week mainly due to increase in the deposits held by the commercial banks with the Central Bank and increase in the currency in circulation.

Net foreign assets of the banking system continued to contract, weighing on the expansion of broad money supply.According to the Weekly Economic Indicators: Purchasing Managers’ Indices for both Manufacturing and Services activities indicated a subdued performance in July 2022, on a month-on-month basis, recording 41.4 and 43.0 index values, respectively.

On 18th August 2022, the Central Bank decided to maintain its Standing Deposit Facility Rate (SDFR) and the Standing Lending Facility Rate (SLFR) at the current levels of 14.50 per cent and 15.50 per cent, respectively.The total outstanding market liquidity was a deficit of Rs. 634.381 bn by the end of this week, compared to a deficit of Rs. 601.878 bn by the end of last week.By 19th August 2022, the All Share Price Index (ASPI) decreased by 0.57 per cent to 8,975.75 points and the S&P SL 20 Index decreased by 3.52 per cent to 2,963.95 points, compared to the index values of last week.

During the year up to 19th August 2022, the Sri Lankan rupee depreciated against the US dollar by 44.5 per cent. Given the cross currency exchange rate movements, the Sri Lankan rupee depreciated against the Indian rupee by 40.5 per cent, the Euro by 37.6 per cent, the pound sterling by 37.1 per cent and the Japanese yen by 34.3 per cent during this period.