Friday, January 15, 2010



The private sector is expected to make a substantial recovery in 2010 and the major source of the expansion of net domestic assets (NDA) will be the increase in credit to the private sector, Central Bank Governor Ajith Nivad Cabraal said. Speaking at the Central Bank Conference Hall presenting the Monetary and Financial Sector Policies for 2010 recently, he said the growth in credit to the private sector is expected to return to positive territory by the second quarter of 2010.

“It is expected to increase, a year on year growth of around 13 percent by end December. However fiscal consolidation efforts will have to be continued and any reckless new public spending in hundreds of billions on recurrent expenditure will have adverse effects on the economy,” the Governor said.

Cabraal said an improved performance in public Corporations is also anticipated this year. An improvement in the financial operations of major public Corporations including the Ceylon Petroleum Corporation and the Ceylon Electricity board is expected.

The performance of public corporations would depend to some extent, on the price of crude oil and fertilizer in the international markets.

He said the credit utilization by the main corporations, similar to credit to the Government, would impact on the credit from the banking system available to the private sector, unless these entities arrange part of their financing from outside sources. That is an option they should consider.

However, the public sector will need to function in line with stipulated norms and it is essential that the 2010, budget should give due priority to critical areas and ensures that borrowing from the banking system does not exceed the stipulated levels.


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