Credit Boom Tests Sri Lanka’s Economic Stability, Policy Oversight

Sri Lanka’s private sector credit surged sharply in 2025, with agriculture and personal loans driving unprecedented growth. Central Bank data shows borrowing climbed from Rs. 99 billion in April to Rs. 231 billion by September.

Agriculture reversed earlier net repayments to capture over 11% of monthly credit, while household lending rose to 26%, reflecting stronger consumer demand but also heightened vulnerability.

Industry remains the largest credit recipient, while services lending fluctuated sharply. Analysts warn that rapid credit growth in households and agriculture, if unsupported by productivity gains, could heighten default risks and stress financial stability. CBSL Governor Dr. Nandalal Weerasinghe stressed the growth is not overheating but acknowledged the need for careful monitoring.

The expansion exposes gaps in policy oversight, with potential risks for rural incomes and consumer debt. Experts urge tighter lending standards and sector-specific safeguards to ensure sustainable credit growth, highlighting the critical balance between stimulating recovery and preventing economic overheating.

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