Private Sector Credit Hits 11-Month Low in January 📉

Sri Lanka’s private sector credit growth saw a sharp deceleration in January 2026, marking the lowest levels of new borrowing in nearly a year as a post-cyclone slowdown deepens. • Overall Private Credit: New private sector borrowing fell to Rs. 82.6 Bn in January, an 11-month low. This follows a peak of Rs. 263 Bn in November 2025. • Debt Stock: Despite the monthly slowdown, the total outstanding private sector debt stock rose 26.3% YoY to Rs. 10.3 Tn. • Banking Sector Dynamics: • Lending from domestic commercial banks dropped to Rs. 108 Bn (a 9-month low). • Total domestic bank debt stock grew 29% YoY to Rs. 9.74 Tn, showing heavy reliance on local funding. • Overseas banking unit debt declined 6.6% YoY to Rs. 556 Bn. • Public Sector & SOEs: • Net credit to the Government edged down 0.6% to Rs. 8.3 Tn. • Credit to State-Owned Enterprises (SOEs) contracted sharply by 29% YoY to Rs. 422.7 Bn, signaling tighter lending controls for public corporations. • Market Context: Data suggests a disconnect between banks' reported "willingness to lend" and actual disbursements, which have slowed following the impact of Cyclone Ditwah. While SME and corporate credit appetite exists, realized lending reflects a more cautious start to 2026.